Big Bet on Natural Gas Venture Promises to Pay Off

Traveling by car from Jijiga, seat of the Somali regional administration, to the vast, dry, and sparsely populated desert plains of Ogaden is unlike any other journey in Ethiopia. The second-largest region after Oromia, the Somali Regional State spans roughly 327,000 square kilometers of mostly arid territory.

Although Somali is Ethiopia’s third-most populated region, its inhabitants are among the poorest in the country, with a history of marginalization under previous regimes. Today, however, the region is building itself up quickly and stands to become a center of economic activity.

In Ogaden, around 1,200 kilometers southeast of Addis Ababa, lie the Calub and Hilala gas fields, where a massive natural gas project promises to be the epicenter of the region’s newfound economic ambitions.

Despite its renewed importance today, the prospect of gas and oil production in Ogaden goes back a full century. Since the 1920s, international corporations from an array of countries, including the US, USSR, Australia, and China, have dispatched experts to this lonely patch of land in hopes of finding fossil fuel deposits.

An initial discovery came in the 1970s, but, for several reasons, did not translate into investment and extraction. This began to change in 2013, when Poly-GCL Petroleum Group Holding Limited, an amalgamation of two Chinese firms, was granted a natural gas and crude oil concession in Calub and Hilala.

In 2018, as Ethiopia was going through the throes of a major political transition, the firm demonstrated successful oil and gas production tests. The outlook was promising, but in September 2022, former Minister of Mines Takele Uma revoked Poly-GCL’s concessions over delays and  concerns about financial capability.

A month before the Minister sent the Chinese corporation the notice of termination, a US consulting firm named Netherland, Swell & Associates certified the Calub and Hilala fields as containing seven trillion cubic feet of natural gas.

For three years, the economic potential buried under the arid plains of Ogaden and the expectations of ordinary Ethiopian citizens remained in limbo. However, in October 2025, Prime Minister Abiy Ahmed (PhD) and the leaders of his administration launched the first phase of the Ogaden Liquefied Natural Gas Project.

At the launch ceremony, officials pledged the first phase of production would have an output of 111 million liters, while the second would add a capacity of over 1.3 billion liters annually.

Nearby, construction was getting started on a fertilizer production plant financed by Nigerian oil tycoon Aliko Dangote. The fertilizer project, the country’s first, is slated to utilize natural gas from Calub and Hilala as an input and hoped to slash Ethiopia’s spending on imports.

Although the government has yet to officially disclose it, The Reporter can confirm that the  firm in charge of LNG production is the GCL Group, one half of the duo that initially held the concession for the Ogaden natural gas venture. Details about how the Chinese multinational regained the rights to natural gas production, however, remain unclear. The same holds true for the seven-year delay between successful production tests and the 2025 launch of the project.

A Ministry of Mines document obtained by The Reporter last year had initially outlined plans for natural gas production under three phases, and mentioned the registration of more than USD 825 million in investment capital related to concessions in 2023/24. This figure is likely the amount GCL paid to regain its license.

According to the document, the plan was to produce natural gas for household energy consumption by mid-2025, with the GCL Group poised to produce 180,000 cubic meters per day by July 2025 as part of the first phase.

The second phase envisioned exporting LNG by mid-2026 following the construction of roads and other necessary infrastructure at the extraction site. Sources claim the plan was to export LNG to China. The third and final phase outlined in the document consisted of using the natural gas deposits as an input for the government’s long-held ambitions to produce chemical fertilizers domestically.

These plans have, however, been altered significantly since the document was published. The Reporter has conducted an investigation into the details and progress of the natural gas and fertilizer projects under GCL, Dangote, and the federal government.

Current Status and Prospects

When The Reporter visited the Dangote fertilizer project site a few weeks ago, work was already well underway. It is located in the middle of a dry and isolated patch of land roughly a dozen kilometers from the historic town of Gode (former regional capital) and nearly 600 kilometers from the current capital, Jijiga.

The massive facility is slated to produce three million metric tonnes of urea annually, making it one of the largest single-site urea plants in the world. It is expected to go into operation in 2029, according to official statements.

Around 100 kilometers away sits the site of the natural gas refinery, which has more or less been finalized. The two plants are to be connected via a 108-kilometer pipeline which will provide the natural gas necessary for fertilizer production.

In March, the Dangote Group and the GCL Group inked a 25-year natural gas supply agreement valued at USD 4.2 billion. As previously noted, the “Poly” half of the former joint venture that owned the concession to the natural gas reserves is no longer around.

Poly-GCL was a joint venture formed in 2013 between China’s state-owned Poly Group, and China-based multinational energy firm Golden Concord Holdings Limited (GCL Group). The amalgamation was made the same year the duo secured the concession in Ethiopia.

Lelissa Daba, an engineer and advisor to the minister of Mines, explained GCL regained the concession after arguing it had already invested heavily in exploration and production.

“After Poly-GCL failed to do the job properly, Ethiopia revoked the concession. Then GCL came and held discussions with Ethiopian officials. It argued it was the major company behind Poly-GCL, and that it had already invested a lot in the project,” Lelissa told The Reporter.

The engineer further disclosed that GCL put down a forex deposit to reassure the Ethiopian government it was fit for the job, but refrained from citing an exact figure.

“If GCL fails to carry out the work, the Ethiopian government can take that money,” said Lelissa.

A report presented to the parliamentary Industrial and Mining Development Committee in early 2024 by Mines Minister Habtamu Tegegn backs Lelissa’s claims.

“We have conducted repeated negotiations and consultations with the company that was previously awarded the contract to develop the natural gas in the eastern part of the country. We conducted the same discussions with its country of origin. We have deployed teams and several stakeholders to conduct in-depth and thorough due diligence on the company. The company and its country of origin have presented to us all evidence and confirmation. Therefore, we have agreed to allow the company to resume the natural gas development work,” the Minister told MPs at the time.

Nonetheless, sources indicate the deposit has been returned after GCL demonstrated satisfactory progress on the project. They also say a well-known external auditor is going through government and GCL books to determine the amount the Chinese multinational has invested in the LNG project since 2013.

The findings will reportedly be figured into GCL’s taxes and cost recovery calculations.

The natural gas refinery has been finalized and is undergoing production testing under GCL, whose contract with the government grants it full rights to refine and produce natural gas and supply it to markets. The Dangote fertilizer plant is slated to be its biggest customer.

Other buyers include the ceramics industry, which carries massive demand for energy. Ethiopia’s cement industry, which relies on coal, has not yet expressed interest in LNG.

Experts at the Ministry of Mines are currently drafting a legal framework to govern the commercialization of natural gas. This will reportedly include legislation aimed at regulating the use of LNG to power public transportation services.

State-owned transport providers, such as the Anbessa City Bus Service Enterprise, have already begun converting their vehicles to run on LNG using new, imported engines.

“Over the past four months, LNG pumping stations have been built in Addis Ababa, Adama, Dire Dawa, and Jijiga. Stations in Addis have already been finalized,” said Lelissa.

This week, China Daily reported that the project aims to retrofit more than 2,000 public buses operating in Addis Ababa within eight months. Preparations are also underway to convert a fleet of government-owned Mercedes-Benz buses.

According to China Daily, the project follows an agreement reached in October last year between Prime Minister Abiy Ahmed and Zhu Gongshan, chairman of China’s GCL Group and senior member of the Chinese Communist Party. The initiative was subsequently designated as a flagship project supporting Ethiopia’s energy transition agenda.

The pilot phase culminated on 12 May when the first converted bus successfully completed a road test, marking a significant milestone for the program.

A new entity, Ethio Gas Marketing Industry PLC, has been formed to undertake construction of these stations, while the state-owned Ethiopian Petroleum Supply Enterprise (EPSE) is slated to act as an intermediary in the purchase of natural gas from GCL.

Officials want to see production begin with 200,000 cubic meters of gas daily, with plans to scale that up to half a million cubic meters in the near future. 

Meanwhile, plans to utilize natural gas in the form of liquid petroleum gas (LPG) for household consumption appear to be on hold. This is partly due to the nature of natural gas extraction, a process which produces significantly more methane (suitable for fertilizer production) than propane (used for household energy).

Officials say they seek to incorporate LPG production further down the line. GCL is also working to erect an oil refinery that is designed to process 3.5 million tons of crude annually from the Hilala fields.

Plans to export natural gas through a pipeline to Djibouti have been scrapped for the time being, according to Lelissa.

“The export idea was good when it was first proposed five years ago. But now, the government’s priority is domestic demand. The current policy decision is that natural gas products should first address domestic needs,” Lelissa told The Reporter.

He says exports will be reconsidered when natural gas production capacity grows.

Meanwhile, the Dangote fertilizer plant is moving ahead quickly, now awaiting the delivery of imported machinery and equipment.

Two weeks ago, Aliko Dangote and the Prime Minister made their second visit to the project site since October 2025. They announced plans to scale up investment to four billion dollars from the USD 2.5 billion pledged last year. The additional funding is meant to finance the construction of the pipeline to GCL’s refinery, 120 MW power plant, a polypropylene packaging facility, and a two-million-ton NPK blending plant.

The Dangote Group controls a 60 percent stake in the fertilizer plant, while the Ethiopian government holds the remaining 40 percent through Ethiopian Investment Holdings (EIH).

Prospects for the Somali Region

In an interview with The Reporter last month, Mustafe Oumer, president of the Somali Regional State, outlined how the region stands to benefit from the natural gas and fertilizer ventures.

 “The Somali region will get its fair share of the profit to be generated by the projects once they are finalized. The profit proceeds are first split between the federal and the producing region. Then the federal pie is again divided to all regions. Hence, the producing region benefits in two ways. The proclamation gives around fifty percent to the producing region. This will be very huge. In terms of injecting more capital, rebooting the region’s budget, creating jobs, innovation and technology, and infrastructure developments; the natural gas and fertilizer projects will be a big game changer for the Somali region,” said the President.

“Apart from the fertilizer, the natural gas will also generate 1,000MW of electricity. The benefits from these projects will radically change livelihoods in the region and spur development,” added Mustafe, characterizing progress on the natural gas project as “superb.”

In March, the University of Kebri Dahar in Somali also inked a strategic partnership agreement with GCL Energy Investments Limited. University administrators say the deal is meant to foster university-industry linkages. Kebri Dahar has also begun offering courses in petrochemical engineering in a bid to produce manpower for the newly emerging natural gas industry frontier.

University administrators told The Reporter that graduates will receive ample employment opportunities at GCL. Other regional officials also expressed optimism surrounding the project and its impact on employment and economic activity in the region.