Ethiopia's Petroleum Enterprise to Import South African Coal

The Ethiopian Petroleum Enterprise (EPE) is to import coal from South Africa with the aim of securing a sustainable supply of coal as an alternative source of energy for cement factories in Ethiopia.

The move follows the unsuccessful bid by the Ethiopian government to acquire pet coke for cement factories in their production of cement. The Ministry of Industry (MoI) had initially issued a directive earlier this year for cement factories to start using pet coke by June 7, 2011, in a bid to reduce foreign currency spending on Heavy Fuel Oil. Later, it rescinded its directive and set up a task force to explore the importation of coal to Ethiopia.

The task force, which includes representatives from cement factories, the Ministry of Industry, Ethiopian Shipping Lines, the EPE, and the Ethiopian Maritime and Transit Services Enterprise (EMTSE) has been looking at possible imports of coal from countries which have geographic proximity, and institutions capable of importing coal at cost effective prices.

In order to facilitate the import process, the EPE has been tasked to look for companies that can supply coal, and the EMTSE is tasked with preparing an area for unloading the coal cargo.

Public private partnerships, the private sector and the cement manufacturers’ association, were considered as possible alternative institutions that could import and distribute coal. The EPE, however, was finally selected based on its previous experience in importing liquid petroleum and distributing resource equitably according to an expert at MoI.

Except for the Mugher and East Cement factories, which expect to finalise installation of infrastructure to utilise coal power sources by 2013, all 12 cement factories currently have the infrastructure for using coal as an alternative energy source.

From all the cement factories, the highest amount of coal is consumed by the Messebo and Derba Midroc factories, which have the capacity of producing 2.1 million and 2.3 million tonnes on a yearly basis, consuming 272,000tn and 272tn of coal respectively.

So as to ease transport costs, only two cement factories, National and Messebo have been importing coal together for the past few months. They imported 41,000tn of coal last week.

There are about six kinds of coal of which Bituminous is used for electric power generation as well as for different industries such as cement.

Out of the 100 countries which produce coal, the US, Russia and China are the leading countries with proven recoverable coal reserves of 237.2 million tonnes, 157 million tonnes and 114.5 million tonnes, respectively. On the other hand, China, the US, India, Australia and South Africa are the top five producers of the world, while Australia, Indonesia and China are the major exporters, according to a study conducted by the Geological Survey of Ethiopia.

Considering the geographical proximity, degree of caloric value (which is 6,300 kilo calories) and cost effective prices, South Africa has been chosen to import coal through the Port of Djibouti.

About $207 will be spent for each metric ton of coal that is transported from South Africa, of which the Freight on Board (FOB) price is $120 for one metric ton and sea transport price, which is $65 for a metric ton.

Taking proximity and the existence of port facilities into account, the Port of Djibouti, located 927Km from the capital, was selected. The port has three berths used to cover the ship with a maximum width of 12 metres, and the capacity to carry 50,000tn, making the Port of Djibouti a better alternative than the Berbera and Tajura ports in Djibouti, according to the team findings.

Since the port did not have the required facility for unloading the coal, an additional investment is required for the construction of the facility which may cost around $4.8 million , according to research conducted by the Derba Midroc Cement Factory.

The EPE, therefore, has been assigned to prepare human resources and a request for a budget from the government, according to sources.

As a long term solution, however, Berbera Port has been recommended by the team which considered the weather conditions of the area to be more suitable for production and work load to be less than in the Port of Djibouti, where 90pc of the county’s import and export trade is conducted.

Berbera Port, located 937Km from the capital, has the capacity to service one mid sized and three small ships with a capacity of 20,000tn.

Around 468 dump trucks with the capacity of loading 40tn are required to transport the product from ports to the centre for 2011/12. However, the amount of coal estimated to be imported and the number of trucks are not proportional. Derbe Midroc has 300 trucks to carry out transport services, 250 trucks however are yet to be imported.

The annual demand of coal for cement factories for the next four years is estimated to be 693.7 million tonnes; with the annual demand for the 2011/12 fiscal year expected to be 896,500tn, not including the Mugher and East Cement factories which will not begin coal consumption by the end of the year.

Coal was first explored in the 1940s, and Italians were also engaged in exploration during that period according to EGS.

Ethiopia has coal reserves amounting to 628 metric tonnes. The coal deposits are largely located in Illubabur, Oromia Regional State and Semen Shoa, Amhara Regional State.