Djibouti raises stakes with Sh20.7b Fuelstor energy hub

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Djibouti has started the construction of a Sh20.7 billion ($160 million) energy and logistics terminal that could reshape the region’s economic prospects.

The Fuelstor Terminal project in the Damerjog corridor, backed by Salaam Group, comes at a time when Kenya and Tanzania are pursuing plans to establish an oil refinery and energy hub in Tanga.

These latest initiatives underscore a growing scramble among East African states to secure strategic control over fuel imports, storage and redistribution.

The new Djibouti facility, with planned storage capacity of 400,000 metric tonnes, is designed as more than a conventional fuel depot.

Developers say it will operate as an integrated trading and logistics platform handling petroleum products, liquefied petroleum gas (LPG), edible oils and other commodities destined for East African markets.

Its launch reflects mounting concerns among regional economies over energy security following global supply disruptions linked to geopolitical tensions, including the US-Iran conflict, which has heightened fears over shipping disruptions along key maritime routes.

The race to dominate East Africa’s fuel infrastructure is accelerating as governments seek to position themselves at the center of a regional energy market whose demand is expanding rapidly due to industrialization, urbanization and population growth.

Kenya and Tanzania have in recent years revived discussions around the proposed Tanga crude oil refinery and related petroleum infrastructure projects aimed at reducing dependence on imported refined products while strengthening their role in regional fuel trade.

Djibouti’s latest investment, however, signals a direct challenge to those ambitions by leveraging its strategic location near the Bab el-Mandeb Strait, one of the world’s busiest shipping lanes linking Africa, the Middle East and Asia.

More importantly, Djibouti remains Ethiopia’s primary maritime gateway, handling over 90 percent of the landlocked country’s imports and exports. Ethiopia is among Africa’s fastest-growing fuel markets, making control of its supply corridors commercially critical.

“This project represents a defining milestone for Fuelstor and a significant step forward for the region’s energy and logistics landscape,” said Fuelstor general manager Houssein Ahmed Houmed during the groundbreaking ceremony.

“Fuelstor Terminal is uniquely positioned to become a key gateway connecting global supply markets to growing demand across East Africa,” he added.

Analysts say the emergence of competing fuel hubs in Djibouti, Mombasa and Tanga reflects broader shifts in regional trade dynamics, where infrastructure investment is increasingly becoming a geopolitical and economic tool.

Fuelstor’s developers say the Damerjog facility is intended to support seamless multimodal distribution into Ethiopia and the wider hinterland through integrated road and port connections.

The terminal is being developed on nearly 22 hectares and will support storage, trading and redistribution operations across the Horn of Africa and East Africa. Construction is being undertaken by Somagec, an international engineering group specializing in industrial and maritime infrastructure.

East Africa consumes an estimated 350,000 to 400,000 barrels of petroleum products daily, with demand expected to rise steadily over the next decade. Yet the region still relies heavily on imported refined fuel, exposing economies to price shocks and supply interruptions during periods of international instability.

That vulnerability has prompted governments and private investors to focus on strategic storage facilities, refinery projects and logistics corridors capable of cushioning regional markets against future disruptions.

For Kenya and Tanzania, Djibouti’s move raises the competitive stakes in a regional energy infrastructure race increasingly shaped by strategic geography, fuel security concerns and the battle to dominate East Africa’s future trade corridors.