Black Rhino, owned by funds of U.S. investment firm Blackstone Group, and a South African-based firm have signed framework agreements to build a fuel pipeline between Djibouti and Ethiopia, the contractors said on Wednesday.
The $1.55 billion pipeline, due for completion in 2018, aims to improve efficiency and safety of importing fuel from the port in Djibouti to land-locked Ethiopia, whose economy is one of the fastest growing in Africa.
The new link will deepen growing economic ties between the Horn of Africa nations. Ethiopia is building a new railway line to Djibouti, which is seeking to become a regional shipping hub. Djibouti also hosts U.S. and French military bases.
"The pipeline will increase energy security, aid economic development and reduce harmful emissions," Black Rhino chief executive Brian Herlihy said in a statement.
The statement said the framework agreements meant the firms now had the official green light to proceed.
Black Rhino's partner in building the 550 km (340 miles) pipeline is MOGS Oil & Gas Services (BRM), a subsidiary of Royal Bafokeng Holdings.
"The Horn of Africa project will sustain the momentum of economic growth and growing fuel demand in both Djibouti and Ethiopia," MOGS Oil & Gas Services chief executives Errol Gregor said in the statement.
The pipeline will transport diesel, gasoline and jet fuel from Damerjog, Djibouti to Awash in central Ethiopia.