Ethiopia-Djibouti LNG export plans advance

Development of the Hilala and Calub gas fields in southeastern Ethiopia may finally be getting underway, more than 40 years after their discovery.

Project developers laid the foundation stone in early March for a $4 billion project to export gas from the fields to China. The project, which is being funded and developed by Chinese joint venture Poly-GCL Petroleum Group Holdings, involves the construction of a 700 km gas pipeline to transport up to 12 billion cubic metres of gas per year from the Ogaden Basin to the port of Damerjog in Djibouti, where the Hong Kong-based independent will build a 3 mtpa LNG export plant. The plan is to eventually expand the plant’s capacity to 10 mtpa.

Construction should start in August and is expected to take three years to complete, a PR representative for the Djibouti government told Natural Gas Daily.

According to a report in International Oil Daily last October, Poly-GCL has contracted France’s Technip to explore options for onshore liquefaction at Damerjog, while it has engaged UK engineering company Halcrow to convert an FSRU to receive the LNG at ports in China.

Poly-GCL plans to install the FSRU either off the coast of the eastern Jiangsu province, where it owns seven gas-fired power plants, or off Hong Kong to supply utilities there, IOD reported.

Poly-GCL was awarded five production-sharing agreements (PSAs) in the Ogaden Basin by the Ethiopian Ministry of Mines in November 2013, including two development blocks and eight exploration blocks.

It finished drilling two appraisal wells on the development blocks in December 2015. Tests should be concluded soon, and the Ethiopian Ministry of Mines, Petroleum and Natural Gas anticipates production could start this year.

According to estimates from the Soviet Petroleum Exploration Expedition (SPEE) in the early 1990s, the Calub field contains 76.5 bcm of initial gas-in-place and initial recoverable condensate reserves of about 128 million barrels. The Hilala field contains 36.8 bcm of gas-in-place.

Poly-GCL has also started exploration work on its other blocks. It has contracted Challenger Geoinstruments to shoot 3D seismic on blocks 11, 12, 15 and 16, and Senshe Electronic Techology Co. to conduct 2D campaign on blocks 3, 4, 17 and 20, Africa Energy Intelligence reported in November.

However, the uncertain security situation in the Ogaden region, a vast swathe of land in the southeast of Ethiopia populated by ethnic Somalis, could hamper development of the project.

The region is one of the poorest in Ethiopia and suffers from regular food scarcity and drought. There are frequent clashes between government troops and separatist elements, such as the Ogaden National Liberation Front (ONLF).

As most of the Ogaden is off-limits to the media and non-government organisations, reliable updates on the region are scarce. However, it appears the security situation has deteriorated in recent years and attacks are becoming more frequent, one security analyst told NGD.

There have been no recorded attacks at Calub and Hilala, which are heavily protected by the security forces. But this could change with the construction of the gas pipeline, which will be harder to protect and offers an attractive target for ONLF fighters.

The history

Ethiopia’s troubled history has ensured successive setbacks for companies hoping to develop the fields – the only major gas finds in the country.

The discoveries were made by United States company Tenneco just before the 1974 Marxist coup that removed Emperor Haile Selassie and set up a provisional administrative council of soldiers known as the Derg.

The fields were then picked up by SPEE in the 1980s, which started proving up reserves but was forced to leave Ethiopia following the collapse of the Soviet Union in the early 1990s.

The fields were acquired and droppedby a series of smaller companies, including the state-owned Calub Gas, Russian companies Methanol and Stroytransgaz, and Middle Eastern group Si-Tech International.

Malaysia’s Petronas won a tender for the fields in August 2006. But the company had only drilled two wells before an attack in April 2007 by ONLF fighters on an oil production facility in the Ogaden killed nearly 100 workers. All Chinese contractors in the region pulled out and Petronas relinquished the blocks in 2011.

China’s PetroTrans took over the blocks in July that year, but the Ethiopian Ministry of Mines revoked its licence in 2012, claiming the company had breached the terms of its PSAs.

In December 2012, PetroTrans initiated arbitration proceedings at the International Chamber of Commerce, arguing the termination was unlawful. The ruling rejected PetroTrans’s claims in January 2016, by which time Poly-GCL had established its own plans for the fields.