Chinese independent Poly-GCL and Djibouti have agreed on plans for a cross-country pipeline to move carry gas to a floating liquefaction plant that the company aims to build to export Ethiopian gas to China.

Poly-GCL chairman Zhu Gongshan told Chinese press last week that the agreement will pave the way for construction start-up by the end of this year.

The 749-kilometre pipeline will start at the long dormant Calub gas field in Ethipia's Ogaden basin and will run for 663 kilometres in Ethiopia and 86 kilometres in Djibouti.

Poly-GCL has completed pipeline engineering and selected a construction contractor, Zhu said. He did not name the contractors involved but sources suggested they are the house engineering entity and pipeline specialist owned by PetroChina. The line is being designed to carry 5.2 billion cubic metres per annum of gas, expandable to 18 Bcm per annum over the long term.

The scheme calls for building an offshore steel structure in Djibouti using Sembcorp Marine’s GraviFloat FLNG concept.

Poly-GCL and Sembcorp have already agreed to proceed with talks for an eventual engineering, procurement and construction contract.

The LNG would be stored on a floating storage unit to be converted from an LNG vessel before being loaded onto an LNG carrier.

Three years ago, Poly-GCL bought the carrier LNG Libra from Norway’s Hoegh LNG for $20 million for conversion into an FSU. The vessel is now stacked at Sembcorp Marine.

Under the plan, Poly-GCL would sell 70% of the initial 3 million tonnes per annum of LNG from the project to China, while exporting the rest to international markets.

Under five separate production sharing agreements in 2013, Poly-GCL is licensed to explore eight blocks and develop another two in Ethiopia.

Gas for the project would come Poly-GCL's Calub and Hilal fields in Ethiopia's restive Ogaden region.

Development is planned in three phases, with first gas due to flow in 2021 at a rate of 3 million tpa of LNG, expanding to 6 million tpa in the second phase and 10 million tpa in the third.

The $4 billion project will involve developing 160 Bcm of recoverable gas reserves at the Calub and Hilala fields by drilling 86 wells with total capacity of 5.1 Bcm per annum, producing for 18 years, said Poly-GCL president Yu Baodong. He added that Poly-GCL has so far drilled 13 wells, including nine that were tested.

The company also plans to build two gas gathering stations at Hilala and one such station and a gas processing plant at Calub, according to Yu.

Yu said the company has applied for approval to build terminals at Yantai in China's Shandong province, Rudong in Jiangsu province and Maoming in Guangdong province to import LNG.

He also said Poly-GCL is planning to launch an initial public offering with work to start this year.

Sources said Poly-GCL gained its foothold in Ethiopia as part of China’s Belt-Road initiative, which intends to see China take a larger role in global affairs with a China-centred trading network.

Projects under the Belt-Road strategy are designed to give easy access to project financing.

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Poly-GCL and Djibouti reach deal on pipeline