Protest-Hit Ethiopia Region Plans Oil Company to Calm Unrest

ADDIS ABABA (Capital Markets in Africa) – A central Ethiopian region that’s seen almost two years of sporadic anti-government protests is planning a new private oil company and is in talks to import Middle Eastern crude, part of an economic initiative authorities say will address some of the roots of the unrest.

Oromia Petroleum Share Co., the planned venture, will import the oil via Djibouti, process it at a new large-scale refinery and distribute it to gas stations owned and operated by local youths, Tekele Uma, head of the region’s transport authority, said in an interview. Potentially creating more than 50,000 jobs, it will build a transportation network initially benefiting farmers and manufacturers in the Oromia region who send their products to the capital, Addis Ababa, and other cities, he said.

The company would compete with National Oil Ethiopia Plc, or NOC, whose shareholders include Saudi Arabian billionaire Mohammed al-Amoudi. NOC is one of Ethiopia’s biggest fuel suppliers, according to a feasibility study shared by Tekele. Oromia Petroleum targets a 21 percent share of Ethiopia’s fuel market within five years of operations.

Ethiopia is ranked Africa’s fastest-growing economy by the International Monetary Fund, but unrest has threatened to derail the boom. The protests that began in Oromia in 2015 over alleged land grabs and political neglect later spread to the Amhara region, with security forces accused of killing at least 600 demonstrators, according to the Association for Human Rights in Ethiopia. The government has acknowledged there were casualties and said they included security personnel. Foreign investment slumped after protesters targeted businesses, including those owned by Nigerian billionaire Aliko Dangote.

‘Economic Revolution’
The Oromo Peoples’ Democratic Organization, one of four parties that make up Ethiopia’s ruling coalition, describes the fuel project as part of an “economic revolution” that seeks to quell the discontent. After the protests, Tekele said, the OPDO “reshuffled leaders from top to bottom and said we’ll have to answer economic grievances and issues of good governance.”

Further plans will be announced in the coming weeks and months, Tekele said. He declined to name the companies in talks to supply the oil.

Oromia Petroleum seeks to capture 7 percent of Ethiopia’s commercial fuel market in its first year, according to the feasibility study produced in May. Four companies currently control 90 percent of Ethiopia’s fuel market, while demand is growing at an average 7 percent a year, it said. The planned refinery, in Oromia’s Dukem town, would be linked to Djibouti by a recently completed $4.2-billion, Chinese-built railway that runs to Addis Ababa.

In its first two years, Oromia Petroleum will aim to build 80 gas stations in Oromia, the Southern Nations, Nationalities and People’s Region, and Dire Dawa — facilities that will employ 2,500 people in total, according to the study. Besides distributing fuel, the company plans to operate related businesses such as cafes, spare-part shops and mechanical workshops, it said. Within five years, Oromia Petroleum plans to expand to 165 stations across the nation, according to the study.

Fuel Consumption
Ethiopia’s annual fuel consumption was about 3.5 billion liters (925 million gallons) last year, according to the feasibility study. Thirteen oil companies currently supply about 740 fuel stations in the country, with Oromia having 220, the largest concentration in all Ethiopia’s regions. The companies include Total SA, OiLibya and NOC.

Oromia Petroleum is a subsidiary of ODAA Integrated Transport Share Co. and will have initial capital of 1.7 billion birr ($73 million), said Tekele, who also heads the new company’s board of directors.

ODAA’s capital comes from share purchases by public enterprises affiliated with Oromia state and investors including Oromia International Bank, Awash International Bank and insurance companies, as well as farmers and youth, according to Tekele. All the state’s 634 municipalities contributed, he said, and “every individual, enterprise, farmer and civil servant will take shares and have ownership.”