Ethiopian Economy - Energy

Power generation improved in 2010 and 2011, but power transmission lines proved incapable of transferring the energy supply to end users and some hydroelectric dams were unable to operate at full capacity. The Ministry of Water and Energy (MOWE) is actively seeking additional investment in Ethiopia's energy sector as it has ambitious plans to export electricity to neighboring countries. In October 2011, Ethiopia began power exports to Djibouti estimated to generate USD $1.5 million per month. MOWE is specifically interested in renewable energy sources and has drafted a feed-in tariff bill which will establish the rates and conditions for independent power producers to sell electricity to the national grid.

Ethiopia and Djibouti concluded an agreement in 2015 giving a green light for the construction of an oil pipeline that stretches across the two countries. The pipeline is going to be managed by the US based African infrastructure development company Black Rhino. The agreement was signed at the beginning of February by Tolosa Shagi, Ethiopian Minister of Mines and Ali Yacoub Mahamoud, Djibouti’s Minister of Energy in charge of Natural Resources Department.

The fuel reservoir project is said to cost US$1.4 billion and expected to minimise fuel transportation costs. The land locked country, Ethiopia, imports petroleum via road using trucks, which is costly. The plan is to construct a pipeline that stretches from the Djiboutian sea ports to a fuel depot in Awash, via Ethiopia’s eastern town, Dire Dawa. The pipeline will be 550 km long and is expected to minimise fuel trucks that make the trek from Ethiopia to Djibouti.

By February 2016 Black Rhino, a company owned by funds from United States investment firm Blackstone Group firm was gearing up to launch the construction of a 550-kilometer fuel pipeline linking landlocked Ethiopia to Djibouti. The United States Assistant Secretary of State, Antony Blinken, told reporters 11 February 2016 Thursday that construction of the $1.55bn project will soon be launched, due to be completed in 2018.

When the fuel pipeline project also known as Horn of Africa pipeline (HOAP), goes operational, it will transport diesel, gasoline and jet fuel to the horn of African nation whose annual fuel demand grows at an average rate of 15%. The pipeline project is projected to boost energy security and economic development to Ethiopia, one of the world’s fast growing economy. After Ethiopia and Eritrean fought a two year long border war in 1998, Addis Ababa has become highly dependent on Djibouti ports to carry out its total import export trade which makes up over 90%.