Maravi

Govt won't allow TAZAMA to export, says Konga

Govt won't allow TAZAMA to export, says Konga
Written by Kabanda Chulu and Chiwoyu Sinyangwe
Monday, January 12, 2009 6:41:54 AM

ENERGY minister Kenneth Konga has said the government will not allow the Tanzania Zambia Mafuta (TAZAMA) to start exporting finished petroleum products to neighbouring Democratic Republic of Congo (DRC) to avoid shortages.

And industry sources have said the unreliability of Indeni Oil Refinery has compelled Oil Marketing Companies (OMCs) to overstock reserves with imported fuel thereby making it difficult for them to uplift the commodity from Ndola Fuel Terminal, which is managed by TAZAMA.

In desperate attempts to force OMCs to start uplifting fuel from Ndola Fuel Terminal, the government increased fuel import tax to 25 per cent from five per cent,

Sources within the Ministry of Energy disclosed that TAZAMA had asked the government to authorise exports of finished petroleum products to copper mines in the DRC, saying the country had more fuel than was required.

But Konga said exports could not be sanctioned because they were likely to result in shortages of petroleum products in the country.

He said the OMCs were only allowed to import finished petroleum products when the refinery was shut down for routine maintenance works and the government expects OMCs to start getting petroleum products locally since the refinery had resumed operations.

“Fuel is not a commodity that can stay for a long time and even if the OMCs had surplus from what they imported, they have been offloading these products on the market hence we expect them to start uplifting from TAZAMA because their surplus will not last forever,” Konga said. “So in this case, we cannot allow TAZAMA to export because it will create shortages and we think fuel should be consumed locally.”

He said the government was monitoring the situation to ascertain whether there were enough stocks of petroleum products before sanctioning exports to the DRC as requested by TAZAMA.

“As at now, we cannot allow exports unless it is established that we have enough fuel and if it becomes imperative that we can export, then we can sanction that but not with the current situation and this is why we have to continuously monitor the situation because we do not want to create fuel shortages,” said Konga.

And industry sources disclosed that the OMCs had been compelled to continuously import fuel because Indeni Oil Refinery shuts operations abruptly, a development that they said often threw their planning into disarray.

And an energy expert who declined to be named said the government was playing ‘double standards’ by accusing the OMCs of overstocking the imported fuel supplies.

The expert also supported calls for allowing TAZAMA to export some excess petroleum products provided the decision was done in a reasonable manner.

“I find it incredible that today the government can accuse the OMCs of having overstocked with imported fuel. Just ask yourself how often Indeni shuts down. There is no way OMCs can survive without imports. They just have to. We have a refinery that shuts almost every time and most often without notice. You only read about it in the newspaper and that time we are always told to import at short notice – a matter of urgency,” said the expert. “So, I think as the government talks about this problem which they created for themselves, they should address the issue of storage bottlenecks. This tendency of finger pointing won’t help all of us. Fuel is too sensitive a matter to be handled in the approach the government is taking now.”

The government has since increased import duty on petroleum products from the previous five per cent to 25 per cent as a measure to force OMCs to access fuel from TAZAMA. This decision was necessitated by energy permanent secretary Peter Mumba’s disclosure that the government risked slipping into debt if the delayed off-loading of the recently acquired 90,000 tonnes of crude oil persists.

Mumba said government needed to refine the feedstock and sell the finished products to raise money for payments to the PTA Bank within the agreed period of three months, but noted that the off-loading process had delayed because TAZAMA did not have enough storage capacity for refined fuel since OMCs were not uplifting fuel from the Ndola Fuel Terminal.

During a recent familiarisation tour of the Ndola Fuel Terminal by newly appointed energy deputy minister Lameck Chibombamilimo, it was revealed that TAZAMA was stuck with 37,000 tonnes of finished petroleum products because OMCs had not been uplifting from the terminal since they imported surplus stocks when Indeni Oil Refinery was shut down for routine maintenance works last October.

TAZAMA management indicated that it had recorded a decline in sales of fuel from one million litres to 400,000 litres per week and attributed the trend to OMCs that were still importing the commodity despite the Ndola Fuel Terminals having enough fuel stocks.

And Petrotech Oil Corporation managing director Reynolds Bowa explained that OMCs had been importing petroleum products to keep the contracts with foreign suppliers and local consumers undisturbed.

Bowa also explained that OMCs were committed to uplift oil from Ndola Fuel Terminal provided the commodity was readily available.

He also disclosed that Petrotech Oil Corporation was currently running down its stocks of imported fuel so that it could increase uptake of fuel from Indeni.

“Obviously, it logistically simpler to uplift fuel from Indeni, but you will appreciate that some months ago, the refinery was shut and during that period, we entered into contracts with foreign suppliers of finished fuel to keep the market supplied and contracts take a little while, so it is basically the issue of the time lag,” Bowa explained. “But the point is that even when Indeni is running, we import fuel to ensure our accounts are not closed so that in case Indeni shuts, we can still import regularly without entering into new contracts. And our ideal situation is that when Indeni is running, we have to import 10 per cent and rely 90 per cent on local source (TAZAMA).”

The Zambian petroleum sector is considered to be unstable and not reliable due to several factors that range from poor planning, inadequate funding, among many other challenges.

And despite signing a two-year contract with the Independent Petroleum Group (IPG) of Kuwait to supply and deliver 1.4 million metric tonnes of comingled crude oil feedstock, the Zambian government has failed to find a financier and just relies on the PTA Bank as a stop-gap measure to finance the country’s fuel imports.

The contract with IPG was entered into in December 2007 and the ministry of energy started negotiations with Stanbic Bank but nothing materialised. The government then engaged Zanaco Plc into negotiations for the financing of crude oil importation, but the two parties again failed to salvage a deal.

Some sources who were part of the failed negotiations revealed that the Zambian government was unwilling to guarantee certain issues.

“You know, a two-year financing contract is very long and in this business of crude oil, there are a lot of fluctuations and other shortcoming, which the banks wanted the government to provide some sort of guarantees,” said the sources.

Labels: FUEL, KENNETH KONGA, OMCs, TAZAMA

posted by MrK @ 6:43 AM