International Finance Corporation expresses interest in funding Ethiopia Djibouti fuel pipeline project
The International Finance Corporation, IFC, the investment arm of the World Bank has expressed interest in financing the planned Ethiopia Djibouti fuel pipeline project.
The South Africa- based infrastructure investment group, Black Rhino, has proposed to the Ethiopian government to build a 550-km long pipeline to transport diesel, gasoline and jet fuel from Djibouti port to central Ethiopia. The project is estimated to cost $1.5 billion. The Ethiopian government has reviewed and accepted the proposal in principle.
Backed by the US investment group Black Stone, Black Rhino has undertaken a feasibility study on the project, which is going to be the first fuel pipeline in Ethiopia.
Chief investment officer with IFC Kalim M. Shah said that IFC has an interest in financing the Djibouti-Awash fuel pipeline construction project. Shah said experts of IFC and executives of Black Rhino had discussions.
“We have been in discussion with Black Rhino but the project is at its early stage. It did not progress to the point where I would have something to announce right now but definitely that is a project we are interested in financing. We are looking at it and had some deliberations with Black Rhino,” Shah said.
He said that it was too early to further comment on the project adding IFC was also looking at the textile, leather and cement industries in Ethiopia as well.
Ethiopia’s annual fuel import, which is growing at a rate of ten percent, has reached 3.6 million metric tons. The country so far uses tanker trucks to transport the fuel from the Port of Djibouti to central Ethiopia costing the country dearly.
The governments of Ethiopian and Djibouti signed a framework agreement on the planned pipeline construction in 2015.
Black Rhino has finalized the feasibility study and it has been confirmed that the project is feasible. The company is now working on the implementation study. It is set to present the final feasibility study to the Ethiopian government, which in turn will review the study and give the green light to proceed with the project if it finds it acceptable.
Once an agreement is signed with the Ethiopian government another agreement will be inked with the government of Djibouti on the modalities of the pipe construction.
The fuel pipeline project, known as the Horn of Africa Pipeline, includes an import facility and 950,000 barrels of storage capacity in Damerjog, Djibouti, linked to a storage terminal in Awash, Ethiopia. According to Black Rhino, the 20-inch (51-centimeter) line is capable of transporting 240,000 barrels of fuel daily. The total cost of the project is estimated at 1.55 billion dollars.
The project is a 50-50 joint venture by Black Rhino and Mining, Oil and Gas Services (MOGS), a unit of the Johannesburg-based Royal Bafogeng Holdings. Financial close is expected in 2017, with construction scheduled for completion after two years. The developers need to raise at least one billion dollars debt financing.
If everything goes according to plan, the project will be awarded to Black Rhino on a build, operate and transfer (BOT) terms. The developers will build the facility, operate it for 30 years and transfer it to the Ethiopian government. It is believed that the developers need to raise at least one billion dollars debt financing.
A non-oil producing country, Ethiopia annually imports 3.6 million metric tons of refined petroleum products, most of it via the port of Djibouti, at a cost of $2.8 billion.
Although the investment cost is high, pipeline is the safest and cheapest mode of fuel transport per one ton of oil. It is also technologically advanced as it uses IT-based monitoring systems.
