Breakaway Somali Region Proposes Surrogate Pipeline for Ethiopia

Published: October 29, 2018

Somaliland’s offer is a bold challenge to Djibouti, a tiny former French colony that’s benefited from its location on a global shipping choke-point to host the U.S. and China’s only official permanent military facilities on the continent. It comes as the broader Horn of Africa region sees dramatic changes, with landlocked giant Ethiopia promising multi-party democracy and peace with long-time foe Eritrea.
Unrecognized State
Somaliland, which unilaterally declared independence from civil war-ravaged Somalia in 1991, isn’t officially recognized by any other nation. Speaking in the self-proclaimed capital, Hargeisa, Jama didn’t specify which officials he’d made the suggestion to, saying “the decision is for the Ethiopian government.”
The government will also approach GCL-Poly Energy Holdings Ltd., which is pumping the fuel, over its proposal, Jama said. A partnership between GCL-Poly and the closely held Hong Kong-based Golden Concord Group signed five production-sharing agreements with Ethiopia in 2013 to explore in the Ogaden basin.
Ethiopian Prime Minister Abiy Ahmed has said gas exports to Djibouti will begin in 2021, two years later than initially planned, and bolster what’s already Africa’s fastest-growing economy.
The chairman of Djibouti’s ports authority, Aboubaker Omar Hadi, said he wasn’t aware of the offer, but GCL-Poly and his government had already signed the contract for a pipeline. “Business is about competition,” he said by email.
Trade Flows
An Ethiopian spokesman for the mines and energy ministry, Mikahil Mengesha, referred requests for comment to an official at the institution’s Petroleum Licensing & Administration Directorate, calls to whom didn’t connect. Tedla Minda, a senior accountant at GCL-Poly’s Ethiopian branch, said he would forward emailed questions to the general manager.
Berbera in Somaliland is already the site of a United Arab Emirates military facility, as well as a port being built by DP World Ltd., which the Dubai state-controlled harbor operator says will help boost trade flows to the U.A.E.
Somaliland, which is bigger than the U.S. state of Florida, is also planning its own oil production. Genel Energy Plc, an oil company founded by Nathaniel Rothschild and ex-BP Plc Chief Executive Officer Tony Hayward, is preparing to drill as many as three wells in the territory’s east, where it has production-sharing agreements, Jama said.
Genel will start drilling at one well in the fourth-quarter of 2019, near Burao in the Togdheer region, according to Jama and Genel’s communications head, Andrew Benbow. “There is oil for sure, but they have to come to know if this is viable for commercial business,” Jama said.
Seeking Jade
RAK Gas LLC of the U.A.E., which has production-sharing agreements for two blocks south and east of Berbera, is in talks with Genel over co-drilling arrangements, according to Jama. The company didn’t respond to two emailed requests for comment sent to an address on its website.
Three Chinese companies will explore with local partners for jade in southeast Berbera, between the Genel and RAK gas blocks and near the U.A.E. base, according to Jama.
He said unidentified Canadian, Chinese, Norwegian and British companies are interested in exploring three offshore blocks on the approach to the Bab el-Mandeb, where the Red Sea meets the Gulf of Aden. Chinese and British companies are also in talks over two further onshore blocks at Somaliland’s border with Ethiopia.[Bloomberg]

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