Ethiopia and Djibouti sign deal to build gas pipeline

Ethiopia and Djibouti have signed a deal to build a pipeline to transport Ethiopian gas to an export terminal in the Red Sea state, officials said.

Ethiopia found extensive gas deposits in its eastern Ogaden Basin in the 1970s. China’s POLY-GCL Petroleum Investments has been developing the Calub and Hilala fields there since signing a production sharing deal with Ethiopia in 2013.

The agreement between Djibouti and Ethiopia comes more than a year after POLY-GCL signed a memorandum of understanding with Djibouti to invest $4 billion to build the natural gas pipeline, a liquefaction plant and an export terminal to be located in Damerjog, near the country’s border with Somalia.

It was envisaged that production would start last year, but the Ethiopian government said that was now likely to happen in 2020.
Djibouti’s Energy Minister Yonis Ali Guedi told Reuters late on Saturday the deal hammered out “key terms that will serve as a basis” for related concession contracts.

“It is the most expensive project ever built in the Horn of Africa region,” he said. “The two parties have reached an agreement in principle to allow them to benefit from the project in an equitable manner.”

POLY-GCL is a joint venture between state-owned China POLY Group Corporation and privately owned Hong Kong-based Golden Concord Group.

Africa’s eastern seaboard could soon become a major global producer of liquefied natural gas, with other planned projects based on big gas finds made in Tanzania and Mozambique.