Ethiopia has moved to ease the burden of petroleum products imports by inking an agreement with Djibouti for the construction of a jointly owned pipeline.
The 550 km multipurpose petroleum pipeline, to be constructed at a cost of $1.5-billion, will connect Ethiopia to the Port of Djibouti.
The pipeline, from Djibouti’s eastern region of Damerjog to Awash, in central Ethiopia, will be constructed by Mining, Oil & Gas Services (MOGS) and Black Rhino Group.
MOGS, a unit of South Africa’s Royal Bafokeng Holdings, and Black Rhino Group have a 50:50 stake and will both seek to raise $1-billion in debt finance for the project.
The pipeline will enable landlocked Ethiopia to transport refined petroleum products, including diesel, petrol and jet fuel, from the Port of Djibouti to Awash, near the Ethiopian capital city of Addis Ababa.
“The project is expected to increase the efficiency and safety of Ethiopia’s fuel import supply chain by aiding in the reduction of fuel transportation costs, increasing the scalability of fuel imports and significantly decreasing the carbon output from importing fuel,” says Black Rhino CEO Brian Herlihy.
He adds that the project will also reinforce Djibouti’s position as a regional shipping hub by expanding the port’s capacity.
The multipurpose pipeline will be a 20-inch- diameter line capable of transporting 240 000 bbl/d. The project will also include an import facility and storage capacity of 950 000 bbl/d in Damerjog, as well as a storage terminal in Awash.
Currently, Ethiopia transports fuel mainly by road, using tanker trucks, which cover a distance of 800 km. This mode of transport is becoming unsustainable, considering the Horn of Africa’s demand for refined oil products is growing at a rate 15% a year.
Ethiopia is among the ten fastest-growing economies in the world, expanding at an average of 6% a year, according to the International Monetary Fund.
“The pipeline will sustain the momentum of economic growth and growing fuel demand in both Djibouti and Ethiopia,” notes MOGS CEO Errol Gregor.
The decision by Ethiopia to partner with Djibouti in the new pipeline project casts a dark cloud on Kenya’s Lamu Port Southern Sudan-Ethiopia Transport (Lapsset) project.
Ethiopia is one of the key partners in the Lapsset project, which encompasses several infrastructure projects, including a petroleum pipeline.