Ethiopia to construct first oil refinery with Chinese partner

Ethiopia is advancing plans to construct its first oil refinery as part of a major industrial project with Chinese energy services firm Golden Concord Group.

Ethiopia's Prime Minister Abiy Ahmed said in statement on X dated Oct. 2 that GCL is working on constructing the new Gode oil refinery -- a 3.5 million mt/year (70,000 b/d) facility that will process domestic crude.

The complex will process crude and condensate from the Hilala oil field in the Ogaden basin, located in the country's eastern Somali region, Ahmed said. Based on estimates from Energy analysts, the facility could be capable of meeting roughly 70% of Ethiopia's current fuel needs.

The prime minister did not share specific timelines for the expected launch of the new refinery, which would be a milestone development for the East African country. Within its previous borders before Eritrea's secession in 1993, the country was once home to an 18,000 b/d refinery in Assab, which was shuttered in 1997.

Today, Ethiopia almost exclusively relies on truck deliveries for its fuel to arrive from the port of Djibouti, after years of failed attempts to progress refinery plans. In the past, local marketer National Oil Ethiopia and Canadian investment firm Helios Fairfax Partners have both sought to develop major refinery constructions, but plans have been set back by infrastructure and funding limitations.

Progress on the new refinery plans comes as part of a major $10 billion infrastructure building project focusing on the country's Somali region, which includes a landmark LNG project and new fertilizer plant, Ahmed said.

Nigeria's Dangote Group is spearheading plans for a 3 million mt/year urea fertilizer plant in the region, which will be supplied with natural gas from Ethiopia's Calub gas fields via a 108 km pipeline, the prime minister announced.

In the gas sector, the country also plans to launch its Ogaden LNG project in Calub with an annual production capacity of 111 million liters/ year, due to later expand to 1.33 billion liters/year, he said, without providing further detail.

"These projects represent more than industrial progress. They embody our shared responsibility to harness opportunities, strengthen cooperation and promote peace," he said.

Poly GCL, a subsidiary of China's GCL, was previously awarded a contract in 2018 to develop Ethiopia's gas fields and build an export pipeline to Djibouti, after it discovered over 133 Bcm of gas reserves in its Calub fields. At the time, it estimated that an LNG plant in Djibouti would cost around $4 billion to construct.

The new construction plans mark a renewed push from Ethiopia to capitalize on its undeveloped oil and gas reserves in the Calub and Hilala fields, which were both discovered in the 1970s but have historically gone underdeveloped. The two reserves are estimated to hold some 4.7 Tcf of gas and 13.6 million barrels of associated liquids.