Djibouti’s new deal with this east African nation will expand the capacity of its port

Ethiopia and Djibouti have signed a deal worth $1.55 billion for the construction of a 550km refined petroleum products pipeline linking the two countries. The 20-inch pipeline which will transport diesel, petrol and jet fuel from Damerjog port in Djibouti to Awash terminal in central Ethiopia has been contracted to Black Rhino Group and Mining Oil & Gas Services (MOGS). Construction work is scheduled for completion in 2018.

The pipeline project includes an import facility with a storage capacity of 950,000 barrels in Damerjog, linked by a 20-inch diameter pipe to a depot in Awash. Oil products are currently transported over 800 kilometers by road from Djibouti port to Addis Ababa. This new pipe is capable of transporting 240,000 barrels of fuel a day.

Djibouti’s port is situated at the realm of one of the world’s busiest shipping lanes. Therefore this project will bolster its position as a shipping hub by expanding the capacity of its port. The project is also set to increase the scale of oil products import and the overall productivity of Ethiopia’s supply chain by reducing the cost of transportation.

“The pipeline will increase energy security, aid economic development and reduce harmful emissions,” said Brian Herlihy, Chief Executive Officer of Black Rhino, which is owned by funds managed by Blackstone Group LP. He also added that partners who are set to work under a 30-year concession, will do so in agreement with the governments of Ethiopia and Djibouti.

MOGS Chief Executive Officer, Errol Gregor explained that the Horn of Africa project will sustain the momentum of economic growth and growing fuel demand in both Djibouti and Ethiopia. However this can only be achieved by both enabling high quality energy and ensuring that there is a steady energy supply at good cost points.

In order to meet the demand for oil products, the Ethiopian Petroleum Supply Enterprise (EPSE) will import three million tonnes of in fiscal year 2015/16 . EPSE’s chief executive officer Tadesse Hailemariam said the importation of three million tonnes of refined oil products represents an increase of 7.14 per cent from the 2.8 million tonnes recorded in the 2014/15 fiscal year. He also added that EPSE plans to build about 160 retail outlets in the country, with a storage capacity of 250,000 litres of petroleum products.

There are currently about 660 petrol stations in the country.

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