Ethiopia’s Natural Gas Breakthrough: What it Means for the Nation

In October 2025, Ethiopia began commercial production of natural gas in the Ogaden Basin (Calub) located in the Somali Region, marking a significant milestone that could transform the nation’s energy sector, industry, and economy. This month, a facility with an annual output capacity of 111 million litres of Liquefied Natural Gas (LNG) was inaugurated, and a second project, which will increase capacity by 1.33 billion litres per year, was initiated, as reported by the Ethiopian News Agency¹. According to this report, in addition to producing LNG, the inaugurated project comprises a Natural gas power plant, which generates 1,000 megawatts, which contributes to the nation’s electric energy generation. Moreover, a fertilizer factory project that utilises natural gas and produces three million metric tons of fertiliser (urea) per annum was launched at the same time. According to the information obtained from the Dangote Group website² this project is one of the world’s largest single-site urea fertilizer production complexes, making it among the top five largest urea production complexes globally. Ethiopian Investment Holdings (EIH), the strategic investment branch of the Ethiopian government, and Dangote Group have agreed to implement the fertilizer project in partnership. In this partnership, EIH will possess a 40% equity share, while Dangote Group will retain 60% ownership of this industrial venture. The agreement also includes provisions for possible expansions for the production of other ammonia-based fertilizers, such as ammonium nitrate, ammonium sulfate, and calcium ammonium nitrate, further solidifying Ethiopia’s role as a key regional hub for fertilizer production. Further information on the projects can be found in many news outlets^{1, 2}. This article presents global context (major producers and reserves), the economic value of gas, and what Ethiopia’s newly developing gas sector could mean today and over the coming decades.

What is natural gas?

Natural gas, primarily composed of methane (CH₄), is a hydrocarbon blend located in underground rock formations, often found alongside oil. It serves for various purposes, including electricity generation, heating, industrial feedstocks (notably in fertilizer production), and as a transportation fuel in either compressed (CNG) or liquefied (LNG) forms. When cooled to approximately -162°C (-260°F), it transforms into a liquid state (LNG), allowing it to be transported over long distances where pipelines are impractical.

Major uses

High energy density per unit mass: burns cleaner than coal or oil in terms of CO₂ and particulates for the same energy output. It can be used for electricity generation, heating (residential, commercial, and industrial), cooking (stoves, ovens), and transportation fuel in the form of compressed natural gas and liquefied natural gas.

Industrial feedstock: ammonia, hydrogen, methanol, ethylene, propylene and other petrochemicals. From these petrochemicals, products such as plastics (PE, PP, PVC), synthetic fibres (nylon, polyester), solvents, adhesives, detergents, surfactants and fertilizer can be produced.

Global picture: who holds the gas and how much is produced

The world’s proven natural gas reserves are concentrated in a few countries. Estimates vary by source; however, the largest five top holders of proven reserves are Russia, Iran, Qatar, the United States and Turkmenistan³, accounting for 24.39%, 17.09%, 12.40%, 4.65% and 3.83% global share, respectively. Russia holds the largest reserves of natural gas globally and stands as the leading producer and exporter of this resource worldwide.

Ethiopia’s natural gas: what we know right now

In 2022, certification from Netherland, Sewell & Associates, Inc. (NSAI), an American-based oil company, indicated that approximately 7 Tcf (200 bcm) of reserves have been attributed to natural gas discoveries in the Ogaden region⁴. Just for comparison, proven natural gas reserves of the top five natural gas producers are Russia (47,800 bcm), Iran (34,000 bcm), Qatar (23,900 bcm), the United States (17,700 bcm) and Turkmenistan (10,000 bcm)⁵. Although Ethiopia’s natural gas reserve is significantly lower than that of major natural gas exporters, it is nonetheless significant in the African context. For many countries in Africa (outside the few very large gas producers), reserves in that range make them serious participants in regional gas supply, development plans (domestic usage, power generation, fertilizer, etc).

Economic value of natural gas: why it matters for Ethiopia

Direct revenue: In December 2019, Ethiopia’s Parliament approved the construction of a $4 billion, 767 km natural gas pipeline from the Hilala and Calub gas fields in the Somali region to the Djibouti port⁶. However, a recent report ⁷ shows that Ethiopia has cancelled its plans to export natural gas from the Ogaden Basin, shifting focus from exports to domestic use.

Import substitution: domestically produced gas reduces the amount of foreign currency spent on imported fuels (such as diesel, LPG, and fuel oil), thereby improving the trade balance. Some reports show Ethiopia spends about USD four billion annually⁸. Natural gas in the form of CNG (Compressed Natural Gas) can be used as a fuel for cars, buses, and light trucks. On the other hand, LNG (Liquefied Natural Gas) can be used for heavy-duty trucks, ships, and long-haul transport.

Industrialization & value‑added: Many important products can be produced from natural gas. One of the important products is fertiliser, for which the Ethiopian government already launched a project in collaboration with Dangote Group. As an agricultural country, Ethiopia spends a large amount of foreign currency on fertiliser imports. In addition, natural gas can be converted into products or intermediate products that can support the national economy. This includes hydrogen, carbon monoxide, ammonia, methanol, synthetic fuels (synthetic diesel, jet fuel, etc.), polyethylene, PVC, polypropylene, acrylonitrile, synthetic rubber, plastics, hydrogen cyanide and many other products. Manufacturing of these products in the country reduces import expenses and creates jobs in the country.

Employment and local development: it creates jobs at various stages at upstream (wells, facilities), downstream (plants, distribution), and subsequent industries that use natural gas for products.

Final remarks

Based on current assessments, Ethiopia’s natural gas reserves are modest by global standards. Nonetheless, this resource holds significant economic potential, especially if the government continues to prioritize import substitution, as demonstrated by ongoing fertilizer projects. Natural gas can be used to produce a range of valuable products, which require further study and careful prioritization to maximize the benefits of this limited resource.