Djibouti - Geothermal Exploration Project in the Lake Assal Region – Supplementary loan

The proposed operation involves an additional loan of UA 10.74 million to the Government of Djibouti to carry out the Geothermal Exploration Project in the Lake Assal Region on schedule and achieve its objectives. This project is part of a geothermal energy development programme that aims at improving the quality of life for Djibouti’s population by helping to: (1) increase geothermal energy production capacity (green energy); (2) reduce oil imports; and (3) reduce greenhouse gas emissions. It will be implemented in three phases: (i) Phase 1 comprises the exploration of the Lake Assal geothermal steam field and confirmation of the characteristics of the field’s geothermal resources; (ii) Phase 2 involves the development of the geothermal field and construction of a geothermal power plant with a capacity of 20 MW; and (iii) Phase 3 involves expanding the capacity of the geothermal power plant to 50 MW. However, the budget allocated for the project only covered part of the cost of drilling two wells. Indeed, during the competitive bid call for the procurement of drilling services, the budget allocated were insufficient to cover the cost of drilling four wells. The amount provided covered only part of the cost of drilling two instead of the four wells initially envisaged. The supplementary resources to be provided by the ADF will help to close the financing gap identified during project implementation and to complete the exploration phase. This operation will cover: (i) the cost of drilling the third well, including the non-funded activities of the first two wells, estimated at UA 9.65 million (USD 13.95 million); and (ii) the cost of additional consultancy services and conduct of a feasibility study on the selection of an IPP for an estimated amount of UA 1.09 million (USD 1.58 million) to be carried out by the geothermal technical assistance firm. By providing supplementary financing, the Bank will enable the project to drill three wells instead of the four initially planned. Thus, the confirmation of the geothermal resource will facilitate the construction of a geothermal power plant in the medium term to increase the clean energy production capacity in Djibouti.