Interview: Dabar Adaweh Ladieh
How do you assess the key projects underpinning the growth of the hydrocarbons sector?
DABAR ADAWEH LADIEH: Djibouti is located on the world’s third-busiest sea route for oil tankers, between the Red Sea and the Gulf of Aden. However, ensuring an adequate supply of fossil fuels has been challenging due to global supply constraints. The country’s hydrocarbons priorities are three-fold: to develop multi-product storage that will meet demand in Djibouti and neighbouring countries; to foster export activities; and to establish Djibouti as a regional petrochemical centre.
These targets will be achieved through public-private partnerships for the construction and maintenance of essential infrastructure. One such infrastructure project is the construction of a 40-ha multi-product petroleum terminal in the Damerjog industrial park, to be built in stages. In the first phase a 3500-cu-metre liquefied petroleum gas (LPG) terminal and a 250,000-cu-metre oil terminal will be built; in the second phase, they will be expanded by 7000 cu metres and 250,000 cu metres, respectively. Feasibility studies are ongoing for both terminals, which have garnered significant interest from international and regional investors.
Allied to this development is the establishment of a national oil reserve to reduce the attending risks of importing refined products and secure up to four months supply of petroleum products for local consumption. This reserve is equivalent to 45,000 tonnes, comprising 20,000 tonnes of diesel, 20,000 tonnes of JET A-1 aviation fuel and 5000 tonnes of petrol. Beyond satisfying local demand, deepening the country’s reserves will help to develop cross-border trade and facilitate deeper regional integration by leveraging Damerjog’s infrastructure to store new products. This will achieve product diversification for export and cultivate local expertise in energy commodity trading. Underscoring the imperative of this endeavour is the limited storage capacity at the current oil depot, Horizon Terminal, with the current stock allocation for diesel, jet fuel and gasoline amounting to 21,000 cu metres. Furthermore, there is no storage capacity at the current repository for LPG, bitumen or heavy fuel oil, for which local demand stands at 50,000 cu metres.
To reinforce Djibouti’s position as an emerging energy leader, the SIHD plans to develop an oil refinery in the Damerjog industrial park. The refinery will have an initial production capacity of 25,000 bpd – amounting to roughly 1.2m tonnes per year – with the ultimate objective of processing 220,000 bpd. With over 400m inhabitants, the COMESA countries will constitute the target market, especially Somalia, Yemen, Ethiopia and South Sudan. In September 2022 Djibouti’s Ministry of Energy and Natural Resources and the South Sudanese Ministry of Oil signed an agreement for the promotion of cooperative operations in hydrocarbons refining.
To what extent is the clean energy transition critical to the SIHD’s operations?
LADIEH: Djibouti’s location on a maritime oil tanker route has fostered an acute sense of environmentalism among local energy stakeholders. LPG, for example, is widely considered a cleaner and safer alternative to coal and kerosene, which are the main cooking fuels used in households across Africa. With only 10% of the regional population utilising LPG and the growing economies of scale reducing the cost of its importation, there is considerable scope for accelerating penetration by investing in gas depots. This would further Djibouti’s goal of gaining 50% of the regional LPG market. On the commercial front, major shipping companies are using liquefied natural gas and very low sulphur fuel oil to comply with maritime environmental regulations. Inculcating environmentally conscious behaviour will be key to achieving the country’s ambition to become a major player in the global energy transition and fostering sustainable economic growth. Part of this involves leveraging infrastructure in the Damerjog industrial park to supply low-sulphur and low-carbon products.
Read More from OBG
