Ethiopia braces for oil shortage as Sudan shuts pipes

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Fuel prices in Ethiopia will be raised in March following an increasing consumption of fuel and its consequent impact on the government’s fuel expenditure. A recent decision by its Sudanese suppliers could also affect fuel availability in Ethiopia. The Horn of Africa country spends an average annual 20 billion birr on the importation of petroleum products.

Ethiopia’s projected budget of 1.42 billion US dollars for fuel importation for the current fiscal year is expected to cover 2,176,188 tonnes of fuel including benzene. An amount that, according to reports, exceeds by 30 percent the 72.2 billion birr annual budget approved for this fiscal year.

Despite the Ethiopian government’s decision in 2008 to introduce the blending of ethanol following an increased demand in fuel, the increasing trend has continued.

And the ever increasing local consumption of benzene coupled with the fluctuation of prices on the international market has resulted in an extra 500,000 tonne import of fuel as against the projected imports set for the current fiscal year, according data obtained from Ethiopian Petroleum Enterprise (EPE), an entity in charge of petroleum importation and distribution.

Recently, the country signed an agreement with Sudan Petroleum Company (SPC) to import 80 percent of its benzene demand from the neighboring Sudan. This agreement was to enable the government cut the huge transportation costs, which would in consequence lower the price of benzene on the local market.

The agreement with SPC has however been suspended following a three month closure of the Sudanese company’s refinery beginning February 1.
And although this is not expected to impact the petroleum deal between Ethiopia and The Sudan, the three-month break coupled with Ethiopia’s inadequate storage capacities may lead to a fuel shortage.

As a result, Ethiopia has designed a contingency plan by raising the percentage of blended ethanol in Addis Ababa, the capital, to 10 per cent from March 7. This follows the success of a similar move in 2008 when the introduction E5 helped the country to reduce the volume of benzene imports by over a million dollars annually.

Having acquired the technology to produce a considerable volume of Ethanol to buttress fuel imports following its various expansion projects, mainly of its sugar factories, including the state owned company Fincha, which has been producing up to eight million liters of Ethanol, and Metehara, which has also embarked on an annual production of 10.5 million liters as of the current year, Ethiopia could handle the arrest of oil imports… to an extent.

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