Djibouti plans LNG, oil terminals to develop regional trade

By ROMIL PATEL
Bloomberg

Djibouti will start work on LNG and crude-oil terminals by March as part of a $5 billion plan to develop regional trade ties, Djibouti Ports & Free Zones Authority chairman Aboubaker Omar Hadi said.

Construction of the two facilities will add to four new ports already being built that will quadruple cargo handling in the Horn of Africa nation to almost 80 million tpyy, Omar Hadi said in an interview with Bloomberg TV Africa.

Durban, South Africa, one of the continent’s busiest ports, handles more than 80 million tpy of cargo, according to Transnet National Ports Authority.

“What the Djibouti Ports and Freezones Authority wants to achieve is to unleash East Africa’s economic potential,” Omar Hadi said. “We are trying to build the economy of the country to serve the neighboring countries in foreign trade.”

Djibouti’s $1.5 billion economy relies on services related to the country’s location on the Red Sea, one of the world’s busiest shipping lanes. Transport and logistics account for more than two-thirds of gross domestic product in the nation of about 873,000 people, according to Omar Hadi.

The two ports under construction at Tadjourah and Goubet are expected to be completed and operational by December 2015, Omar Hadi said. Work on a multipurpose facility at Doraleh and a livestock terminal at Damerjog began last month and both are expected to be finished in December 2016, he said.

Chinese, Indian, Brazilian and Turkish investors are contributing investments to each port, Omar Hadi said, without providing details.

Middle Income

Djibouti is developing rail links, oil pipelines and other infrastructure as it seeks to become a middle-income country by 2035. The economy is forecast to grow 6% this year and 6.5% in 2015.

The three existing ports in the capital, Djibouti City, currently handle about 17 million tpy of containers, oil and general cargo, Omar Hadi said. That amount is expected to grow about 10% next year, he said. Traffic at the four new ports under construction is estimated at 40 million tons, while the LNG and crude terminals will handle 20 million tons, he said.

“The six new ports will mainly handle export commodities,” Omar Hadi said.

Underutilization of existing capacity at Djibouti’s Doraleh port suggests that there’s currently no need for the country to expand its facilities, said Bert Hofhuis, founder of Fleetlink, a Cape Town-based transport consultancy. Doraleh last year handled less than half its estimated design capacity of 1.5 million twenty-foot equivalent units, he said.

Logistical Constraints

Djibouti also has logistical constraints that may make some of the expansion plans unfeasible, Hofhuis said. For instance, the country currently has no pipeline that would feed LNG and oil to Ethiopia or other countries in the region, he said.

A port planned for the town of Goubet would be difficult to access because of dangerous currents that would require the use of a number of tugs to guide vessels, he said.

A railway linking Djibouti’s ports to the capital of neighboring Ethiopia, Addis Ababa, is expected to be completed by October 2015, Omar Hadi said. The link is being built at a cost of about $4.2 billion and will help Djibouti extend its trade links into South Sudan and other East African nations, Omar Hadi said.

Great Lakes

“Djibouti’s ports are serving Ethiopia and South Sudan, and with the railways and roads development will reach the Great Lakes countries,” he said.

Nations in Africa’s Great Lakes region, a system of lakes in the Great Rift Valley, include Rwanda, Burundi, the Democratic Republic of Congo, Tanzania and Uganda. The Kenyan port of Mombasa, East Africa’s biggest, serves countries including Uganda, Rwanda, Burundi and eastern Congo.

Djibouti’s government in July rescinded DP World Ltd.’s concession at Doraleh after it said it found evidence the Dubai- based company paid bribes and gave other financial incentives to the former chairman of the facility. DP World, the world’s third-biggest port operator, denies the allegations.

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