Angola to supply finished petroleum products to Zambia

Angola to supply finished petroleum products to Zambia
By Chibaula Silwamba and Gift Chanda
Sun 08 Jan. 2012, 11:30 CAT

ANGOLA has agreed to supply finished petroleum products to Zambia, says energy permanent secretary George Zulu.

In an interview in Lusaka yesterday, Zulu said Angola had suggested that the two countries form a joint venture, similar to Tanzania Zambia Mafuta (TAZAMA), for the supply of petroleum.

"Angola is indicating that they are ready and have enough finished petroleum products for us to lift from there. We will start with lifting the finished products and then we move on to crude which we will take to Indeni for processing," Zulu said. "President Michael Sata sent first Republican president Dr Kenneth Kaunda as his special envoy to Angola and president Kaunda came back with very positive news that the government of Angola is very much willing to help Zambia secure petroleum products from that country."

Angola, which borders with Zambia in Western and North Western provinces, is Africa's second largest oil producer after Nigeria and is highly tipped to surpass the west African nation this year.

Zulu said energy minister Christopher Yaluma would next week lead a delegation of Zambian technical experts for bilateral meetings in Angola to cement the agreements on the procurement of petroleum from there.

"A technical team is now being prepared as a follow up because our friends in Angola have gone ahead in making preparations to deal with Zambia this January. I am composing a technical team to go and meet their colleagues in Angola so that we can start looking at Angola for fuel," Zulu said. "The intentions of the PF government are to bring the cost of fuel to manageable levels by the majority of Zambians."

Zulu said Zambia's sourcing of petroleum products from afar had led to high landing costs, which were affecting ordinary consumers and hampering national development.

He said, therefore, Angola would be the cheapest source of petroleum products and best option.

"The President has given us ultimatums that we must deal with Angola very seriously and Angola is very serious. This process is being tailored in three phases: the first phase is to start lifting finished petroleum products from Angola to Zambia; the second phase is to set up the railway line. Our colleagues in Angola are doing Benguela railway and here we have to do the same to bring oil at cheaper cost," Zulu said. "The third is to put up a pipe line; we want to work out a joint venture similar to TAZAMA. Angola has invited Zambia to have a joint venture between the two countries so that we can benefit from Angola."

Zulu said Dr Kaunda and the Angolan government had agreed on preliminary areas of cooperation.

President Sata has repeatedly called for sourcing of fuel from Angola.

The President also urged exploration for oil in Western and North Western provinces.

Zambia, a landlocked country with eight neighbours, sources its petroleum products from the Middle East via the port of Dar es Salaam in Tanzania.

However, the cartel-determined prices of crude oil on the world market, freight and other costs, and partly corrupt middlemen in the procurement process, have made the landing costs high in Zambia.

Meanwhile, energy director Oscar Kalumiana says there are currently no discussions going on regarding the immediate recapitalisation of Indeni oil Refinery by the government.

Kalumiana said the government had no immediate intention to recapitalise the country's sole oil refinery.

He said Indeni has managed to turn around its performance in the recent past using internal resources.

Indeni has been underperforming because of decaying infrastructure, but recent maintenance works have improved the plant's performance, which is estimated to be running at a capacity utilisation rate of over 70 per cent.

The plant needs in excess of US $65 million to make necessary upgrades for the aging refinery.

"Currently there has been no discussion around making that decision to recaptalise Indeni," said Kalumiana on the sidelines of the brief on the fuel situation in the country. "Indeni has come round in terms of making profits compared to other years. They are not making losses…it is back on its feet. In terms of further investment I think that is something that government will have to look at later and make a decision."

Recently, the government said it would not float any of its shares in the 24,000 barrel-per-day oil refinery on the Lusaka bourse or seek another strategic equity partner after buying French oil giant Total's 50 percent stake.

It immediately became unclear as to how the government intended to raise the needed capital to get the plant running at 100 per cent.

Floating shares on the Lusaka Stock Exchange (LuSE) would have also enable Zambians to partly own the refinery.

Indeni initially was jointly owned by Total El Fina EIF and the Zambian government when they both held 50 per cent shares each.

The 38-year-old plant annually shuts down for routine maintenance but the shutdowns usually lead to fuel shortages in the country which also threaten to reverse the country's economic gains.