Ethiopian government hopes to leapfrog towards oil independence

Private companies in Ethiopia are driving the emergence of the country's biofuels industry. Now the government of the nation of 75 million people is getting involved after a troubling study by the Ministry of Trade and Industry shows that increasing international demand for fossil fuels will endanger the future security of supply to the country. Therefor, the country hopes to become entirely oil-independent by investing in locally produced biodiesel and ethanol.

Ethiopia is among the poorest of the world's least developed countries, with over 45% of the population living below the poverty line. Significant improvements to Ethiopia's trade balance are needed to stimulate economic development. But around 65% of Ethiopia's export earnings are needed to pay for the import of petroleum products. Long transportation distances add to the costs of getting the fuels to Addis Ababa, where ca. 40% of the petroleum fuels are consumed. This is a large burden on Ethiopia's trade balance. Ethiopia is entirely dependent on oil imports, and even though its current consumption is very low (a mere 724,000 tonnes of diesel and 1.5 million tonnes of petroleum products per annum), its consumption rate is growing at around 10% per year (following its rapid economic growth, standing at 9%).

The study therefor focuses on the feasibility of kickstarting a biodiesel and ethanol industry in the country, to reduce its reliance on foreign oil. The Ethiopian Ministry of Trade and Industry, the Ministry of Agriculture and Rural Development, and the Ministry of Mines and Energy discussed the issue and decided to form a technical committee. It is to be led by the Ministry of Mines and Energy through its Energy Development Department. Sources from the Ministry of Trade and Industry state that "there is no land problem in the country, it [biofuels production] is an appealing option as it is a labour intensive sector. The government would like to see the sector grow in leaps and bounds the way we observed in the floriculture industry." Specifically, the study looks at soil types in the country and at potentially suitable energy crops. So far, it has identified Jatropha curcas as a crop that can be adopted on a wide scale in different geographical zones.

Several biofuel companies active in cultivating Jatropha have already built a presence in the country. Amongst them Energy Seed Plc [no site], FRIEC Green power [no site], Biofuels Ethio Plc [no site], and the National Bio-Diesel Corporation (now owned for 80% by Sun Biofuels Ltd). These companies have started work in the Afar, Oromia, Benshangul Gumuz and Gambela Regional States.

The National Bio-Diesel Corporation Plc, a company which was established by two Germans and an Ethiopian, received an 80,000 hectare plot of land in the Benshangul Gumuz Regional State. The company is expected to invest €42 millin (US$60 million) in the sector. The corporation hopes to produce 150 million litres of biodiesel a year, covering 15% of the country's fuel consumption. An Israeli company, Hovev Agriculture Ltd, is waiting for the green light from the federal investment office to enter the market and is planning to invest US$ 100 million. It has requested 400,000hectares of land.
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The Energy Development Department in the Ministry of Mines and Energy is working to deliver regulations in the coming three months.

According to the Ethiopian Petroleum Enterprise, the country consumed 724,000tn of diesel and imported close to 1.5 million tonnes of petroleum products in the 2004/2005 fiscal year.

The National Bio-Diesel Corporation Plc (NBC) received a 4,000ha plot in June and has recieved another 1,000ha in the South Nations Nationalities Peoples Regional State (SNNPRS) to plant jatropha and is negotiating for more, which will be used to produce biodiesel.

The 4,000ha plot, which was leased at 117 Bir [€10/13.4US$] per hectare, is located in Welayita Zone, in the Affo district. According to Yeshitila Seifu, head of potential studies and promotion department of the SNNPRS investment commission, NBC has already started planting seedlings on the Welayita plot the 1000ha is in Gamo Gofa.

NBC’s other request is to get more land in the region. “The Corporation has gotten very positive indications that it will receive the land soon,” stated Yeshitila. The plot in Welayita has already started the pre-plantation process.

In late January 2006, NBC acquired 85,000ha plot in the Benishangul Gumuz Regional State near Pawe, in Mambuk district, where it invested 60 million dollars and which should cover 15 percent of the country’s diesel demand.

Jatropha is a shrub with a maximum height of 5 metres; its seeds have a high oil content and are resistant to drought. The plant is used as an ingredient for traditional medicine in some parts of Ethiopia, and is also used for building fences in some parts of the country.

Two Germans and one Ethiopian-born US citizen established the National Bio-diesel Corporation Plc. in 2003. The founders sold 80% of the company’s shares to the UK based Sun Bio-Fuels in 2004.

According to sources at NBC the newly acquired plots are not only for jatropha planting, but also for the planting and testing of alternative oil plants. The source declined to name these alternative oil plants. According to experts, it will take up to five years before the first jatropha biodiesel will appear on the market.