US embassy cable - 04DJIBOUTI1443

C O N F I D E N T I A L SECTION 01 OF 02 DJIBOUTI 001443 
 
SIPDIS 
 
STATE FOR AF, AF/E AND AF/RSA 
STATE ALSO FOR EB 
PARIS/LONDON FOR AFRICA WATCHER 
 
E.O. 12958: DECL: 11/10/2014 
TAGS: PREL, MARR, MOPS, EPET, ECON, EINV, EWWT, DJ, ET, TC 
SUBJECT: PROGRESS CONTINUES AT DORALEH PORT 
 
Classified By: AMBASSADOR MARGUERITA D. RAGSDALE. 
REASONS 1.4 (B) AND (D) 
 
1. (C) Summary:  Ambassador and Pol/Econoff visited the 
construction site of the new port facility at Doraleh on 
November 8 to track progress and obtain an update from the 
port's project manager K.K. Menon of Emirates National Oil 
Company (ENOC).  Ambassador's last visit had taken place in 
July.  Doraleh's construction schedule has remained, for the 
most part, on time and completion should be on schedule, 
according to Menon.  Menon and Ambassador discussed ENOC's 
contract with Defense Energy Support Center (DESC) for fuel 
tanks for use by the U.S. Navy, DESC tracking of port 
construction, and the assessment that DESC may be interested 
in leasing an additional four tanks to meet U.S. military 
needs.  Menon also noted progress made on the road connecting 
the new port of Doraleh to the city of Djibouti and the main 
route to Ethiopia.  The new port is still considered by 
Djibouti's government to be the country's gateway toward 
becoming a Dubai in the Horn of Africa region. End summary. 
 
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Pylon Needs Have Changed 
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2. (U) The new port facility at Doraleh is coming along well. 
 Progress has been hampered slightly by difficulties with a 
soft sea floor and pylon construction.  Project Manager K.K. 
Menon of Emirates National Oil Company (ENOC) said in the 
initial survey of the sea terrain, the depth to reach hard 
earth on the sea's floor was 40 to 50 meters.  However, in 
some areas soil firm enough to construct pylons was not found 
until drilling to a depth of 60 to 70 meters.  Menon 
commented that this unexpected depth has caused the need for 
longer pylons, which have been found in Turkey.  Delays in 
completion of construction on time will hinge on whether 
these pylons will arrive on time.  The only other difficulty 
encountered in construction has been the constant need for 
Argon gas and the lack of a reliable shipping agent for the 
gas.  ENOC's solution to this problem is to create an Argon 
gas plant on site during construction, which would 
subsequently be dismantled when the new port comes on line. 
 
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U.S. NAVY AS CUSTOMER 
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3. (C) Menon told Ambassador that a visit in October by a 
Defense Logistics Agency (DLA) and Defense Energy Support 
Center (DESC) team evaluated progress on construction of the 
Phase I oil terminal at Doraleh, and specifically the four 
tanks to be leased by DESC for the U.S. Navy.  The team also 
made a final needs assessment for the contract.  Menon said 
that the team indicated there might be a requirement for an 
additional four oil tanks, making a total of eight.  Another 
topic discussed with the DLA/DESC team was the desired 
completion date.  According to Menon, DESC would like to 
start the contract two months early (April, 2005 vice a 
contract date of June, 2005) in order to facilitate a move 
from facilities in Yemen at the expiration of the Yemeni 
facility's contract.  Menon commented that ENOC would not 
commit to an early completion date but, still, is striving to 
meet that date. 
 
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GETTING LOCAL OIL COMPANY BUY-IN 
-------------------------------- 
 
4. (SBU)  The ongoing issue of oil companies Exxon-Mobil, 
Shell and Total being required by the government of Djibouti 
to move their operations to Doraleh was again raised as a 
topic of discussion. Menon informed Ambassador that the 
following day, November 9, the Director General of Djibouti's 
Exxon-Mobil office was to visit the port.  Menon did not 
indicate whether the intent of the visit was to enter into 
any discussion about leasing tanks or merely to get a closer 
look. However, he stated that ENOC was not pressuring 
companies to move because ENOC believes it would be 
beneficial for Djibouti to have an alternative source for 
oil.  In Menon's opinion, the government's demand is based on 
environmental reasons since tanks at the current port are 
extremely old and do not have the leak prevention mechanisms 
newer tanks have.  At Doraleh, he said, the tanks are being 
built with a system to monitor and detect any leaks that 
might happen.  Menon said this was unlikely because the tanks 
are constructed with computerized equipment that ensure even 
and thorough welding, and with a membrane beneath it to 
prevent leaks entering the ground soil. 
 
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ETHIOPIA'S VESTED INTEREST 
-------------------------- 
 
5. (SBU) Rumors of Ethiopian involvement in ownership of 
Doraleh, or in the least contracting their own tanks at 
Doraleh, are now leaning towards the latter.  Menon told 
Ambassador that a delegation from Ethiopia's petroleum and 
trade ministries was to visit for three days later in the 
week.  Discussions have revealed that the Ethiopian 
government is serious, according to Menon, but the question 
of how long Ethiopia will take to commit remains. 
 
6. (U) Whether Ethiopia contracts tanks for its proprietary 
use or not, the road connecting Doraleh to the main truck 
route is an important factor.  Doraleh's construction 
includes rebuilding of the road to the city and creation of a 
connecting road to the existing truck route.  Construction 
started only recently but has been going smoothly and 
quickly.  Installation of fiberoptics underground for 
utilities wiring will also be part of the road construction 
project.  Menon was fully confident the roads would be 
completed on time and would not be an issue. 
 
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PERSONNEL RESOURCES AND DJIBOUTI 
-------------------------------- 
 
7. (U) In terms of employment, Doraleh is still bringing in a 
large number of expatriate workers.  The total number is now 
around 620 persons, 30 percent of whom are Djiboutians.  Most 
of these Djiboutians are hired on a weekly basis in order to 
spread the few jobs available over a large number of people 
over time.  Menon said for the actual operation of the port, 
there will be a transition to permanent employees instead of 
rotating weekly workers.  Some will ultimately be hired from 
the rosters of Exxon-Mobil, Shell and Total local operations. 
 Other Djiboutians who fit the education requirements will be 
trained for six months to one year in Dubai and then begin 
their jobs at Doraleh.  Menon expected that there would 20 to 
30 Djiboutians trained in the first wave. 
 
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COMMENT 
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8. (C) The remaining planned phases of Doraleh port have yet 
to begin construction, although Menon indicated that work 
would commence in the next few months.  Phase 2, the 
container terminal, still is expected to be operational in 
September 2005.  A Phase 3 project remains in planning stages 
and a completion date has not been determined.  Moreover, 
ENOC plans now to reclaim part of the area attached to the 
causeway for use as additional port space. Both the port's 
principal local backer, businessman Abdurrahman Boreh, and 
the Government of Djibouti seriously view the Doraleh project 
as Djibouti's gateway toward becoming a Dubai in the Horn of 
Africa region.  Support from ENOC in this project -- and the 
commitment of the U.S. Navy -- have helped galvanize their 
sentiments.  End comment. 
RAGSDALE