Ethiopian official said Wednesday that the Horn of Africa country has signed an agreement on oil exploration with a U.S. firm.

The agreement was signed Wednesday between Ethiopia's Ministry of Mines and Energy and Afar Exploration. It will enable the latter explore oil in northeast Ethiopia's Afar State.

Under the agreement, the U.S. firm is granted an oil exploration license that would enable it to prospect for crude oil in the sedimentary basin in Afar State. It is given an exploration area covering 21,187 sq km.

At a signing ceremony, Ethiopia's Minister of Mines and Energy Alemayehu Tegenu said the Ethiopian government has paid due attention to the development of the energy sector.

Alemayehu said his ministry has designed a five-year strategic plan, adding that oil exploration and development are important elements of the strategic plan.

The ministry will provide the necessary assistance to the U.S. company to help it achieve its goal, he said.

Ethiopia granted five oil exploration licenses in the past two years. The giant Malaysian company, Petronas, took four licenses that enables it to prospect for oil in the Gambella and Ogaden basins. This week the ministry conferred a license to another Malaysian-based company, Pexco, which planned to search for oil in Ogaden.

The Afar basin is one of the five sedimentary basins in Ethiopia. Unlike Ogaden and Gambella the Afar basin is not yet explored.

Ethiopia is endowed with energy resources such as coal, oil and natural gas. Current natural gas reserves are estimated to be 24 million cubic meters.