Negotiations Delay Ethiopia Gas Project

The construction of the natural gas pipeline to transfer natural gas from the Ogaden basin in Somali Regional State, Ethiopia to Djibouti has been delayed pending discussions between the Ethiopian government, project partner Chinese firm POLY-GCL and the government of Djibouti. This is according to an article published in the Ethiopian newspaper The Reporter.

The newspaper quoted the Ethiopian Minister of Mines, Petroleum and Natural Gas, Motuma Mekassa, who confirmed that there is a significant amount of proven gas reserve that Poly-GCL intends to develop and export to China. Motuma said that the project is delayed due to the complicated negotiation with the Djiboutian government.

The minister also stated that there is an ongoing negotiation between Poly-GCL and the government of Djibouti. "It is a complex negotiation which took a long time. It has been a bit delayed. Our government is persuading the parties to expedite the negotiation. We hope that it would be finalised soon and an agreement would be signed and the pipeline construction would begin in 2018," Motuma said.

The Chinese firm Poly-GCL signed petroleum development agreement with the then Ethiopian  Ministry of Mines in November 2013 that would enable the company develop the natural gas reserves in the Calub, Hilala and Genale localities within the Ogaden basin and prospect for additional oil and gas deposits. The company has since then drilled several exploration and appraisal wells which have demonstrated promising results.

The gas development project estimated to cost four billion dollars involves construction of a gas pipeline stretching 700kms from the gas fields to the Port of Djibouti and a gas treatment plant at the Port of Djibouti to process the gas for export to China. Poly-GCL initially planned to start gas production in 2017 but this was later pushed to 2018. This is however not likely to happen before 2020 based on the delays in negotiations.

The Business Times recently reported that Poly-GCL Group is in final talks with a Singapore yard group called Sembcorp Marine to award a contract to build a floating LNG plant.  Poly-GCL Petroleum's chairman and president, Barton Yu, said the project aimed at tapping the vast reserves of Ethiopia's Ogaden basin will be developed across three phases, scaling up from a start-up capacity of three million tons per annum from early 2020 to 10 million tons per annum once the full field development kicks in.

The contract value to design and build the floating LNG is estimated at one billion dollars.  A final investment decision on the project is expected in September or October 2017 with construction on the FLNG scheduled to begin before the end of 2017. Poly-GCL has also purchased a second-hand LNG carrier. 

Source: The Reporter