The Berbera option
Ethiopia, which has had more than one spat with Djibouti over the access it gets to its port facilities, the service levels available there and the price it pays for these, is soon to have a new port gateway made available to it.
Somaliland, Ethiopia and China have signed trilateral agreements on gas, oil and logistics which include the large-scale development of the port of Berbera, Somaliland.
Road and rail networks will form part of the development and connect Berbera to Ethiopia as well as other regional networks.
Located at the mouth of the Red Sea, the port of Berbera is reported to have already attracted the interest of more than one international port operator.
The Horn of Africa has recently been attracting significant new energy exploration activity following the discovery of oil in Uganda and Natural gas in Tanzania.
The port of Berbera will be developed by the Chinese company PetroTrans to accommodate exploration base activities as well as the supply of oil and gas to Ethiopia.
Spinning off the back of this will be major new dry cargo capacity which offers the potential for container, general cargo and dry bulk operations – hence Ethiopia’s interest in the port as an alternative to, or addition to, the gateway offered by Djibouti port.
It is further rumoured that Ethiopian Shipping Lines (ESL) might become one of the main shareholders in the port, perhaps in conjunction with an international terminal operator.
ESL recently placed an order for nine new vessels in China and has long hankered after its own base. It lobbied hard to take over the Djibouti container terminal that DP World ceased container operations at when its new Doraleh container terminal came into operation.
It was unsuccessful in this attempt but this undoubtedly left it with a bad taste in its mouth and to see it establish a presence in Berbera would hardly be a surprise.
Among other potential benefits, it would undoubtedly see Berbera as an opportunity achieve a lower cost port operation and one that facilitates lower freight costs overall to Ethiopian importers and exporters.
There is also the reality that with the growth in annual volumes of Ethiopian transit cargo – said now to be over nine million tonnes – Ethiopia requires alternative routes for its cargo from Djibouti.
The Port of Port Sudan is one option but this is already being used to export sesame seeds. The port of Berbera is a new option that will provide major new capacity at pricing, including warehouse storage charges, that will be very competitive with Djibouti.
For an international terminal operator, to invest in it also represents an attractive proposition. With Ethiopia involved there is a virtual guarantee of healthy cargo volumes from the outset of the new port extension’s life.
As Djibouti may well reflect in the future, however, as additional port gateways open up there is always the danger that so-called guaranteed cargo volumes can be lost to another new, lower cost, port platform.
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