Monday, October 26, 2015
Ethiopia and Djibouti Agree to $1.5 Billion Oil Pipeline Deal
Office of U.S. Representative Karen Bass
The governments of Ethiopia and Djibouti have reportedly signed an oil pipeline construction agreement worth $1.5 billion that will link the two countries oil export industries. The deal will allow Ethiopia to use Djibouti’s Red Sea port to import more than 50,000 barrels of oil per day. The deal also includes an import facility with a storage capacity of 950,000 barrels of oil and the capacity to transport 240,000 barrels of fuel per day. During the last decade, economic growth in landlocked Ethiopia has outperformed every other country in Sub-Saharan Africa. To sustain this growth, the government has prioritized expenditures to expand infrastructural development.
The agreement received throughout the region, including from the neighboring states of Sudan, South Sudan, Kenya and Egypt; as it has the potential to increase energy security, promote economic growth momentum and make the region a commercial logistics hub for the rest of Africa.
This new pipeline agreement also brings additional development opportunities to the Horn of Africa. Ethiopia is currently pursuing an agreement with Djibouti for the construction of a new railway line between the two countries. If agreed, the railway could produce positive outcomes for the mobility of goods and services between the nations.
Finally, the project is expected to increase the efficiency and safety of Ethiopia’s supply chains, by reducing transportation costs while increasing the scale of oil imports. This pipeline project could also reinforce Djibouti’s position as a regional center for shipping and expand its capacity for trade. The pipeline is schedule to be completed by late 2018.