Gov’t Scraps Ogaden Gas Export Plans In Policy Shift

Mines Ministry revives import reduction ambitions

The government has officially scrapped long-touted plans to export natural gas from the Ogaden Basin through a pipeline to Djibouti, citing persistent financing hurdles and implementation delays.

‎The cancellation, confirmed in the Ethiopian Energy Outlook 2025, represents a major shift in national energy policy—moving away from export ambitions and toward domestic utilization.

‎“The Government of Ethiopia has cancelled the planned natural gas extraction in the Ogaden region, and a pipeline project to Djibouti for export as Liquified Natural Gas (LNG),” reads the report.

‎Jointly prepared by the Ministry of Water and Energy, Ethiopian Electric Power (EEP), Ethiopian Electric Utility (EEU), and the Petroleum & Energy Authority, the Energy Outlook notes that “challenges in securing project financing and slow project implementation” contributed to the government’s decision to cancel the project.

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‎The proposed pipeline—stretching 767 kilometers and initially designed to transport 460 PJ (petajoules) of gas annually, equivalent to 25 percent of Ethiopia’s total final energy demand—was cancelled as early as 2022.

However, this is the first time the government has publicly acknowledged the decision in an official policy document.

‎The report warns about the possible repercussions of the government’s decision.

‎”It [the cancellation] limits Ethiopia’s ability to generate revenue from natural gas exports and diversify its energy sources,” it reads.

‎Still, it outlines a strategic shift.

‎ “Use of domestic natural gas would increase CO₂ emissions, but could be a relevant option to balance generation in dry years and reduce the need for fertilizer imports,” reads the energy outlook paper.

‎In a dry year, Ethiopian hydro plants get 20 to 25 percent less water than in a normal year. It may be a challenge to accommodate such variable demand in a future natural gas project, according to the document.

‎The official announcement of the policy shift reflects previous signals from the Ministry of Mines.

‎Less than a year ago, in October 2024, the Ministry’s 2024/25 planning document laid out an ambitious plan for LNG production for household energy consumption by mid-2025.

‎The Ministry’s planning document at the time stated that Poly-GCL, a joint venture between the Chinese Poly Group Corporation and Hong Kong’s Golden Concord Group, would begin producing 180,000 cubic meters of LNG per day by mid-2025, while setting a timeline for export activities.

‎However, the planning document still retained the country’s vision to gain from exports. It revealed Ministry officials’ ambitious plan to see the company engage in LNG exports by mid-2026, with the construction of roads and other necessary infrastructure at the extraction site scheduled to begin by April 2025.

Poly-GCL was slated to execute a three-phase production plan, the third phase of which consisted of using the natural gas deposits as input for the government’s long-held ambition to produce chemical fertilizers domestically.

Financial and technological feasibility studies for the venture were scheduled to be finalized by the end of 2024, according to the Ministry’s 2024 planning document.

‎It also stated that Ethiopia registered more than USD 825 million in investment capital related to the granting of natural gas concessions to investors in 2023/24.

‎However, reports indicate that Ethiopia’s ambitions for natural gas production and LNG exports have faced repeated setbacks. Poly GCL, a subsidiary of the GCL Group, was first granted a concession to explore and produce natural gas in the Somali region in 2013.

‎In June 2018, the Chinese company conducted crude oil production tests in the Calub and Hilala oil fields. Calub has 11 wells—all of which are productive.

‎In 2021, the government signed a joint development agreement with the Moroccan OCP Group to establish a fertilizer production plant in Dire Dawa. There have been no indications of progress on the project since.

A year later, former Mines Minister Takele Uma revoked the concession for Poly GCL, allegedly for falling behind schedule as stipulated in the company’s licensing agreement.

That same year, Netherland, Sewell & Associates, an American firm specializing in petroleum resource analysis, certified the presence of seven trillion cubic feet of natural gas in Ogaden.

‎The Ministry reversed its decision in June 2024, and the GCL Group was expected to begin producing 180,000 cubic meters of LNG per day by July 2025, according to the planning document.

‎Despite the 2025 Energy Outlook’s confirmation of the cancellation of the planned natural gas extraction in the Ogaden region and the pipeline project to Djibouti for export as LNG, the Ministry of Mines appears to be reviving some aspects of the project—albeit with a new focus.

‎“The Ministry of Mines is now exploring a new project with a focus on domestic use, for instance production of fertilizer,” the report notes. It also mentions interest in collaborating with EEP to use gas for power generation, especially during hydropower shortages.

‎Natural gas is now being positioned as a strategic substitute for imported petroleum products, which cost Ethiopia over USD four billion annually, according to the outlook.

‎It also cites proven gas reserves of 2.6 trillion cubic feet (2,800 PJ), with total potential reserves estimated at 6.9 trillion cubic feet (7,200 PJ)—enough to meet fertilizer, electricity, and industrial needs for more than 50 years.

‎In line with this, the October 2024 document obtained by The Reporter also revealed that the Ministry had signed an agreement with Wuhuan Engineering Co. Ltd. to conduct a techno-economic study to establish a fertilizer factory that uses natural gas as an input. The feasibility study was expected to be finalized within five months, according to the document.

‎Feasibility studies for the construction of nearly 600 kilometers of roads linking Jigjiga with Gode via Deghabour and Kebridhar are underway, according to the same document. The government is also looking to upgrade the road from Ginir to Gode using financing from the government of South Korea, it reads.

‎According to Ministry data, nine months ago it was also preparing legal frameworks to govern and regulate the nascent natural gas industry, with its experts working on a policy, proclamation, regulation, and directives.

‎The 2025 Energy Outlook underscores a sobering reality: while the dream of exporting gas to global markets is officially shelved, the government is doubling down on using its reserves to address domestic fuel, electricity, and food security gaps.

‎”The government of Ethiopia is in the process of implementing a strategy for developing, processing, and using the country’s natural resources to offset imports,” it reads. “The policy will focus on natural gas exploration and prioritize development of the sector to open the area for companies and to encourage investments.”