China’s Golden Concord Group (GCL) has signed an agreement with Ethiopia to build a $2.5bn oil refinery in the country’s Somali region, as part of efforts to cut petroleum imports and drive industrialisation. The site will be co-developed by GCL and sovereign wealth fund Ethiopian Investment Holdings (EIH).

APA News reports that Prime Minister Abiy Ahmed officially launched the Gode project, laying the foundation stone for both the refinery and a new urea fertiliser project.

If realised, Gode would add to a wave of downstream investment across Africa in recent years. The facility is intended to process around 3.5mn tonnes of fuel annually, or about 70,000 barrels per day (bpd).

No commissioning date has been announced. But the first of two constructions phases should be completed within 24 months, according to Billene Seyoum, the prime minister’s spokeswoman, as quoted by Bloomberg. The facility will tap crude oil and condensate from the Hilala fields located in Ethiopia’s eastern Somali region, Abiy said in a post on X.

Oil and gas exploration in Ethiopia has been attempted for decades, with limited commercial success, owing to financing challenges, security concerns, and infrastructure gaps.

International companies including Tenneco, Petronas, and Chinese firms explored in the Ogaden Basin from the 1970s onward.

More recent efforts by Poly-GCL, a joint venture involving GCL, focused on developing the Calub and Hilala gas fields. The Gode Oil Refinery would be developed alongside upstream gas projects in those fields.

According to Addis Insight, Ethiopia’s Finance Minister Ahmed Shide and GCL’s chairman, Zhu Gongshan, have discussed fast-tracking refinery, metallurgy hubs, and oil & gas development.

The refinery project adds to a separate $2.5bn fertilizer plant that state-owned Ethiopian Investment Holdings is building together with Dangote Group, which will be fuelled by gas from Calub.

Nigeria’s $20bn Dangote refinery – the continent’s largest at 650,000 bpd – began operations in 2023 after years of delays and cost overruns.  Angola this year inaugurated the 30,000 bpd Cabinda refinery, the country’s first new plant in five decades.