ADDIS ABABA, Ethiopia – In a major policy reversal, the Government of Ethiopia has officially scrapped its long-standing plan to extract and export natural gas from the resource-rich Ogaden Basin in the Somali Regional State, citing persistent financial constraints and project delays. The announcement, detailed in the newly released Ethiopian Energy Outlook 2025, marks the most explicit admission yet of the project’s suspension and signals a new energy strategy focused on domestic consumption over global exports.
The Ogaden gas project — centered on the Calub and Hilala fields — had been at the heart of Ethiopia’s ambitions to become a key energy exporter in the Horn of Africa. Originally spearheaded by the Chinese-led Poly-GCL Petroleum Group, the $4.5 billion project aimed to produce liquefied natural gas (LNG) and transport it via a proposed 767-kilometer pipeline to the Port of Djibouti. From there, LNG would be shipped to global markets.
The initiative was expected to generate significant state revenue and help meet regional energy demands. However, since the signing of exploration and production agreements in 2013, the project has faced continual delays and shifting timelines. As recently as 2024, officials expressed optimism that production would begin by mid-2025 — projections now officially abandoned.
According to the Energy Outlook 2025, the Ethiopian government halted the project due to “major challenges in securing financing” and “slow implementation timelines.” The report, jointly authored by Ethiopia’s Ministry of Water and Energy, Ethiopian Electric Power (EEP), and the Petroleum and Energy Authority, notes that the plan to export 460 petajoules of gas annually is no longer viable under current economic conditions.
The pipeline, intended to carry LNG from eastern Ethiopia to Djibouti’s coast, has been on hold since early 2022. This marks the first time authorities have openly confirmed the project’s cancellation in an official policy document.
Rather than pursuing LNG exports, Ethiopia is now reorienting its energy policy to prioritize domestic use of its natural gas reserves. The government aims to:
- Support the development of local fertilizer production, reducing dependency on costly imports.
- Utilize gas as a backup power source during periods of hydropower shortage caused by drought.
- Decrease the import bill for petroleum products, which currently costs the country over $4 billion annually.
This pivot, analysts say, is a pragmatic response to global energy volatility and Ethiopia’s own fiscal realities.
The cancellation affects multiple stakeholders:
- The Ethiopian government, which loses a potential revenue stream from LNG exports.
- Chinese firm Poly-GCL, the original project operator, now sidelined after failing to meet implementation benchmarks.
- The Somali Regional State, home to the gas fields, which had hoped for economic development and job creation tied to the project.
- Neighboring Djibouti, which stood to benefit from pipeline transit and port activity.
“This is not the death of Ethiopia’s gas ambitions — it’s a tactical pause,” says Dr. Lidet Tadesse, an energy economist based in Addis Ababa. “The domestic pivot could offer more stable and equitable returns in the long run, particularly if paired with industrial policy that fosters downstream development like fertilizer production or electricity generation.”
Dr. Tadesse notes that Ethiopia’s estimated 6.9 trillion cubic feet of natural gas reserves remain a strategic asset. The challenge, she says, lies in creating the regulatory and investment environment needed to unlock their full value.
The official termination of Ethiopia’s LNG export project in the Ogaden represents a significant policy recalibration — from bold international export ambitions to a more grounded domestic energy strategy. While the decision may disappoint global investors, it may also mark a turning point in Ethiopia’s pursuit of sustainable, sovereign energy development.
