Local firm proposes $1.5bn oil pipeline from Angola

Local firm proposes $1.5bn oil pipeline from Angola
By Kabanda Chulu
Tue 01 Dec. 2009, 04:00 CAT

A ZAMBIAN company, Basali Ba Liseli Resources (BBLR) has proposed to set up a US $1.5 billion oil pipeline from New Lobito Oil Refinery in Angola to Kapiri Mposhi aimed at providing reliable and sustainable supply of finished petroleum products.

In this project, BBLR intends to work with the governments of Angola and Zambia, with the collaboration of financing institutions and strategic technical partners in initially constructing a 2,000-kilometre pipeline from the oil refinery in Lobito to Kapiri Mposhi, in Zambia, to transport a minimum of 25,000 barrels per day, of refined petroleum products (12.5 per cent of the proposed refinery capacity).

Earlier this year, the Angolan government commenced construction of a new oil refinery to cost US $8 billion and would produce 200,000 barrels per day of refined petroleum products including petrol and kerosene, among other products.
It is projected that the refinery, being constructed at the Port of Lobito, would be due for commissioning by the end of 2013.

And according to the Angolan Ministry of Oil, 90 per cent of the production would be consumed domestically and within the SADC region while the balance of 10 per cent would be exported to countries outside the region.

Explaining the project concept yesterday, BBLR director Wamulume Kalabo said the goal was to contribute to the enhancement of Zambia’s energy security, in particular, and of the region, in general.

“This is in full recognition of the unavoidable imperativeness of energy to national survival as well as to socio-economic activities.

We realise that to attain and sustain, this goal, there is a need to identify an efficient, secure and sustainable formula to deliver petroleum products to the final users,” Kalabo said. “BBLR wishes to work with the governments of Angola and Zambia as equity partners from the onset, with a riding Build Operate and Transfer (BOT) arrangement for a specific period.

While BBLR’s main motivation is income, the motivations of the governments of Angola and Zambia will be to enhance the business and investment climate of the two countries and the region, through the relative reduction in the pump price of the petroleum products and to reduce energy import bill for Zambia and other beneficiary countries, and hence free resources to funding other activities like, social infrastructure, education and healthcare.”

Kalabo said other intended motivations for the two governments would be to enhance energy security through possible creation of adequate reserves and to enhance regional integration and security through the co-ownership, co-management and co-operation to be created by the project, and to enhance the governments’ revenue through profits from the business.

When asked if due diligence studies had been conducted to determine the viability of the project and if a strategic partner had been found, Kalabo said the Angolan government had done some studies, stating that the best and viable option of transporting petroleum products in the region, including Zambia, was through pipelines.

“We should not continue accessing petroleum from expensive and far places when the commodity can be acquired next door. We have found Global Industrial Solution Incorporation of China and this company will be our EPC (engineering, procurement and construction) partner meaning that they will design, procure and construct and upon completion they will operate the pipeline under BOT arrangement for a period of time then hand it over to us and the two governments will not put any capital but will become shareholders so that the project can secure letters of comfort,” Kalabo said.

“This is a very viable project and it has been well received by various financiers, meaning that the project has been listed for possible funding and they are just waiting for us to secure letters of comfort from the two governments which we want to do under the memorandum of understanding and we have written to the government and we expect response this week.”

Kalabo said finances would also be sourced through BBLR office in South Africa, although the project and company were incorporated in Zambia.

He said the objective was to transport a minimum of 25,000 barrels or 3,972,750 litres per day of refined products from Angola via pipeline to Kapiri Mposhi for purposes of redistribution within Zambia and other countries such as the DR Congo and Malawi.

“Our major objective is to give the Zambians and some countries in the region competitively priced petroleum products, coupled with a reliable and sustainable mode of supply. This will in turn reduce the cost of doing business and enhance the ease of doing business, and in turn enhance the inflow of foreign direct investment, as well as enhance the level of local investment,” Kalabo said.

“If Zambia will be consuming 2,500,000 litres per day, the balance, 1,472,750 litres will go into reserves, and into fulfilling off-take agreements with neighbouring countries.”

Kalabo said petroleum was an unavoidable ingredient in economic development of Zambia and the world at large. He said the petroleum import bill was the single biggest expense import bill for Zambia.

“Besides the constraint the import bill imposes on national resources, the resultant relative high fuel pump prices impacts negatively on the cost of doing business, and hence makes Zambian products and services uncompetitive,” Kalabo said.

It is visualised that the MoU and project structuring should be concluded by end of March 2010 and a comprehensive study will be in place by the end of September 2010 while financing agreement should be targeted for March 2011. Construction works are expected to commence by September 2011 with commissioning of pipeline operations expected by 2016.

“If all would-be equity partners will understand the necessity of the project from the onset, the project preparation timelines from MoU to commencement can be reduced by more than half and the support required will be mainly the political will from both states by way of conceptual buy-in,” said Kalabo.