Ethiopia, Djibouti, and Dangote to Build $660 Million Oil Pipeline

Ethiopia, Djibouti, and the Dangote Group owned by Nigerian businessman Aliko Dangote are planning to jointly build an oil pipeline worth $660 million, which will connect the two countries, aiming to strengthen oil supply and reduce costs and delays caused by oil transportation through the commercial route between Ethiopia and Djibouti.

According to Reuters, the project will consist of a pipeline approximately 120 kilometers long, which will transport refined oil between Djibouti and Ethiopia. Major storage facilities for oil will also be constructed.

In Djibouti, particularly in the Damerjog area, a storage facility capable of holding approximately 375,000 cubic meters of oil is planned, while another facility in Dewele, Ethiopia, will have a capacity of 800,000 cubic meters.

An official from the office of Ethiopian Prime Minister Abiy Ahmed stated that the project is expected to commence within about 18 months.

Abiy Ahmed mentioned that the project is a collaboration between Ethiopian Investment Holdings and the Dangote Group, emphasizing that the main goal is to reduce logistics costs and delays caused by oil transportation between Ethiopia and Djibouti.

Ethiopia, which has no coastline, heavily relies on Djibouti, particularly its ports, to access essential goods imported from abroad.

Oil is one of the most important commodities transported between Ethiopia and Djibouti, thus a pipeline directly connecting the two countries could change the way oil is delivered within Ethiopia.

The governments of both countries also believe that the new infrastructure could enhance energy security and improve supply chain resilience.

If the project is realized, it is expected that part of the oil transportation currently dependent on road transport will be shifted to the pipeline, which could reduce costs and the time required to deliver oil to Ethiopian markets.

This project also demonstrates how the Dangote Group is expanding its investments in East Africa, as the company has previously undertaken other major projects in Ethiopia costing approximately $4 billion, including a pipeline for a fertilizer plant, a power plant, and a polypropylene packaging facility.

In Kenya, Dangote and the government are also expected to lay the foundation for a new project next week for a crude oil refining plant, which is planned to be built in Lamu, with a capacity of 700,000 barrels per day.

Prime Minister Abiy Ahmed announced the oil pipeline project during a visit to Djibouti, where he discussed the matter with Djibouti's President Ismail Omar Guelleh and Aliko Dangote.

If realized, the project could be significant for the economic and trade relations between Ethiopia and Djibouti, particularly in the energy sector, as Djibouti continues to strengthen its role as the main route for Ethiopia's trade and imports.

This $660 million oil pipeline thus becomes a project that brings together the interests of three parties: Ethiopia seeking a reliable oil supply and lower transportation costs, Djibouti wanting to further strengthen its infrastructure and regional trade, and the Dangote Group expanding its investments in the energy and industrial sectors in Africa.