Djibouti to Raise $5.9 Billion From Investors for Port Infrastructure

(Bloomberg) — Djibouti is in talks with India, China, Brazil, Russia, and Arab investors to finance infrastructure projects worth $5.9 billion, the head of the country’s ports authority said.

The Horn of Africa nation, which is seeking to become a middle-income nation by 2035, plans to develop rail links, ports, and oil and gas pipelines, Djiboutian Ports and Free Zones Authority Chairman Aboubaker Omar Hadi said in an interview today. Commitments for “close to 57 percent” of the project costs have already been received from China, India, a Saudi Arabian fund and other investors, he said in London.

The projects include a doubling of capacity at the Doraleh container port to 3 million containers a year by 2015, according to documents distributed by the Djiboutian government at a conference in London. That would rank it as the continent’s biggest such facility, it said.

Djibouti, which hosts about 2,500 U.S. military personnel at the Camp Lemonnier military base, has a $1.1 billion economy with fewer than 1 million people. The economy relies on services related to the country’s strategic location on the Red Sea, one of the world’s busiest shipping lanes.

Economic growth in Djibouti averaged 5 percent from 2006 to 2012, compared with 2.5 percent from 2001 and 2005, Ahmed Osman Ali, governor of Djibouti’s central bank, said at the conference.

Six Ports

The country plans to create six ports to handle commodity exports, according to Hadi.

In addition to the expansion of Doraleh, Djibouti plans to build a facility at Tadjourah, with the first phase being funded by the Saudi Fund for Development and the Arab League’s Kuwait- based Arab Fund for Economic and Social Development at a cost of $80 million. A second phase of development will begin in 2015 and cost $90 million, the government said.

Last month, construction began on another port at Ghoubet that will provide for the export of salt and gypsum deposits from Lake Assal. The lake is the site of the world’s largest undeveloped salt reserve, according to Salt Investment SA, a unit of Washington-based Emerging Capital Partners. Chinese funding of $64 million has been secured for the port, the government said.

Talks are under way for $600 million oil refinery that will allow for the import of crude oil from South Sudan by pipeline, the government said. The finished products will be sold in East Africa.

South Sudan signed an agreement with Ethiopia and Djibouti to build an oil pipeline that would reduce its dependence on crude shipments via neighboring Sudan. The two Sudans came to the brink of war last year amid a dispute over processing and transport fees.

LNG Terminal

Plans for a $2.6 billion liquefied natural gas terminal in Djibouti, including a liquefaction plant and a pipeline, will enable the export of 10 million cubic meters of gas from Ethiopia to China annually from 2016, the government said.

Brazil and Russia are mainly interested in financing the oil pipeline from South Sudan, a gas pipeline and rail links with Ethiopia, Hadi said.

Negotiations have started with the two nations for “concessional loans” of about $1 billion to be repaid at an annual interest rate of 3 percent over 25 years, Hadi said. Brazil’s commitment “is not yet finalized,” he said.