Oil and gas exploration in the Red Sea off Eritrea began in the 1960s, when Eritrea was part of Ethiopia. Following independence, the country began awarding production contracts in 1995, although as of 2001 the results had been disappointing. Petroleum consumption was estimated at 8,000 barrels per day in 2000. In 1997, due to high costs, Eritrea and Ethiopia agreed to shut down their joint operations at the petroleum refinery at Assab and import refined petroleum products. The refinery had a capacity of 18,000 barrels per day. In 2000 an estimated three million barrels per day of oil were shipped through the Bab el-Mandeb, a narrow waterway between Eritrea, Yemen, and Djibouti that connects the Gulf of Aden with the Red Sea.
As of 2002, about 80% of the population was without electricity, which was available only in the larger cities and towns, although the government was constructing additional electrical distribution lines. In 2000, net electricity generation was 210 million kWh, of which 100% came from fossil fuels. In the same year, consumption of electricity totaled 195.3 million kWh. As of 2001 Eritrea had about 60 MW of diesel-fired generating capacity.