Interview: Houssein Ahmed Houssein
To what extent is energy infrastructure in the Horn of Africa able to cater to regional demand?
HOUSSEIN AHMED HOUSSEIN: There has been a 16% growth of throughput for refined products going to Ethiopia. This means we are talking about 3m cu metres in 2014, which increased to 3.5m cu metres in 2015. Taking into consideration the low price of oil products, this increase in demand is expected to grow further in the coming years. The main challenge is that, whereas 95% of the product going to the Ethiopian market is currently stored in Djibouti, capacity has not been expanded since the creation of the country’s sole petroleum terminal. The current storage capacity in Djibouti stands at 379,000 cu metres and is already operating at maximum capacity. In order to cater to the increasing levels of regional demand it has become necessary to expand energy infrastructure in the country. The proposed phase-three terminal expansion project would raise total capacity to half a million cu metres and would ensure sufficient capacity in the coming years. The current capacity constraint has impacted costs for consumers mainly in Ethiopia, as increased waiting times for vessel off-loading has incurred additional average costs of $3m-4m per year.
Although the main challenge now is for Ethiopia and Djibouti to cope with the increasing demand by expanding storage facilities, other regional landlocked countries have experienced a similar surge in consumption. Djibouti, due to its geographical location and advanced infrastructure, has with expansion plan the potential capacity to store and transport to the COMESA market’s 800m consumers and provides a competitive alternative to, for example, Port of Mombasa in reaching the Horn of Africa’s land-locked regions. This approach is in line with the president’s vision to become the regional hub for global and regional oil trade activities. The location of Djibouti on the straits of Bab el Mandeb, Red Sea is considered very strategic to the global oil trade routes since it is on the crossroad of major shipping lanes (Med-Suez-Arabian Gulf).
How can the regional supply chain of refined products be further improved?
HOUSSEIN: 95% of the current supply chain for refined products to Ethiopia passes through Djibouti, with the remaining going through South Sudan for Mogas products only. The current issue for Ethiopia is that the 5% going through South Sudan passes through poor facilities and has seen disruptions in supply. For the time being, Djibouti is the preferential choice for Ethiopia as the supply chain and connecting facilities are reliable. Planned projects such as the Lamu Port and South Sudan-Ethiopia Transport Corridor would lead to crude oil being refined in Kenya and exported through both a pipeline and the Lamu Port, reducing transit volumes through Djibouti and satisfying Ethiopia’s need for the diversification of their supply chain. Steps have been taken in Djibouti to improve the capacity of the regional supply chain. A possible connection between the railway and the terminal could play an important role. Yet the key issue is not the transfer or diversification of transport modes for refined products; it is the lack of storage capacity. Currently, 350-500 trucks per day swiftly distribute the product around the clock. The advantage of the current trucking system is that the trucks can reach a specific destination.
What has been the impact of lower oil prices on energy consumption in the region?
HOUSSEIN: Lower oil prices have had a substantial impact on the 16% of volume growth that goes to the local market in the country, where consumption has markedly increased. However, this impact could have been greater if the fuel price to customers were much lower and if there was an active industrial sector in the region that increases consumption.
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