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Zambia should develop new oil refinery, says Chirwa

Zambia should develop new oil refinery, says Chirwa
By Kabanda Chulu and Fridah Zinyama
Wednesday May 28, 2008 [04:00]

ZAMBIA’S solution to the increasing global fuel prices lies in developing a new refinery that can process crude oil from Angola, Bolton University Professor Clive Chirwa has said. And University of Zambia economics Professor Venkatesh Seshamani has said Zambia must explore alternative sources of energy because the high oil prices will continue having a negative impact on production costs and growth of the economy.

Commenting on the global crude oil price that reached US $ 135 per barrel (about 159 litres), Prof Chirwa said the increasing oil prices were threatening Zambia’s economic recovery programme that was mapped out in the last national budget.

He said the world oil market has become so turbulent such that even rich nations were finding it difficult to contain their petroleum costs.

“If we do no re-plan our strategy for survival, we will end up in enormous problems that will see oil prices crippling our entire economy and one of the solutions is to buy all the oil we need but this is not possible since our reserve accounts cannot afford such large expenditure on a single item.

Therefore, I foresee trouble in terms of petrol shortages,” Prof Chirwa said. “Another solution is that we need to move away from buying semi-processed oil and seriously make decisions once and for all of using oil from our neighbours, Angola and Namibia.”

He said that if the Indeni Refinery cannot technically refine Angolan crude oil, then the government should quickly invest in another refinery that could do so.

“What we need to do is to build a short pipeline from the oilfields in Angola to North Western province where the new refinery will be located and in doing so, we will kill two birds with one stone because we will reduce 50 per cent cost on middle east oil and another reason is that the refinery will initially use Angolan oil and later when our oil fields are explored will process Zambian oil but that is if the quantities we have are commercially viable,” said Prof Chirwa.

And Prof Seshamani said the high oil prices were here to stay and they would inevitably impact on production costs and growth of the Zambian economy.

"One of the main sources on which the desired growth rate of seven per cent or more is predicated is the growth of the copper mining sector but this sector itself requires huge quantities of diesel to run its operations and if the sector has to grow, its demand for oil will also go up commensurately," said Prof Seshamani.

"So the country is caught up from both sides, high oil prices impede high growth through cost-push inflation but high growth which alone can contain inflation requires high supplies of oil."

Recently, World Bank managing director Graeme Wheeler stated that rising energy and food prices will have devastating implications for global poverty and food security.

Wheeler stated that developing countries were confronted with tough challenges in the short and medium-term to maintain their growth momentum in a highly volatile environment.

He stated that a longer term solution is switching to alternative fuels, including renewable (ethanol and biodiesel) or synthetic fuels.

"One of the cruel ironies today is the connection between rising energy and food prices. This development can have devastating implications for global poverty and food security," Wheeler stated. "Volatile oil prices have put pressure on developing countries to look for ways to smooth out the bumps in the market and volatility has also hurt economic growth, investment and trade, and several developing countries have lost ground in the poverty fight as a result."

He stated that the price of oil, currently at US $135 per barrel, has escalated much more than expected and it has caught most by surprise.

"Unlike the previous oil shocks which were largely supply induced, price hikes this time reflect growing energy demand in emerging markets, especially China and India. International capital flows seeking investment opportunities in the face of a declining dollar have also played an important role," stated Wheeler.

And British Prime Minister Gordon Brown called for international pressure on oil producers’ group OPEC to bring oil prices down. In an interview with Sky News, Brown said it was not absolutely clear why the oil price had remained stubbornly high and was rising.

“Clearly oil prices are very high but also there needs to be some international efforts with OPEC to get the oil price down, especially that demand for oil is lower because of lower growth in Europe and the United States and lower growth in China than had been predicted at the start of the year,” Brown said. “So we've got to look very carefully at what is happening in OPEC and in oil prices and I think there is a strong case for putting pressure to see if we can get oil prices down.”

However, some analysts cited the supply disruptions in Nigeria, tensions in Iran and the weakness of the US dollar as some of the causes.

And international investment bank, Goldman Sachs has predicted that oil prices could rise towards US $150- US$200 a barrel because of a lack of adequate supply growth.

"The possibility of US $150-US$200 per barrel seems increasingly likely over the next 6-24 months, though predicting the ultimate peak in oil prices as well as the remaining duration of the up cycle remains a major uncertainty," the bank stated.

Labels: BIOFUELS, CLIVE CHIRWA, FUEL, GORDON BROWN, OIL, VENKATESH SESHAMANI

posted by MrK @ 3:41 AM