Maravi

ERB bemoans absence of national strategic oil stock

ERB bemoans absence of national strategic oil stock
By Chiwoyu Sinyangwe
Wed 01 Feb. 2012, 13:59 CAT

THE continued absence of national strategic petroleum stocks poses a risk to the security of supply, says Energy Regulation Board.

And ERB stated that the recent pronouncement by energy permanent secretary George Zulu that Angola has agreed to supply finished petroleum products to Zambia via a suggested joint venture firm similar to TAZAMA which Zambia shares with Tanzania may not offer an immediate or short-term solution to the challenges faced by Zambia.

On October 7, 2011, newly-appointed energy minister Christopher Yaluma announced that the government had reduced fuel prices by average 6.4 per cent as it scraps off the K65 per litre Strategic Reserve Fund (SRF).

The SRF, prior to its abolishment, compelled Oil Marketing Companies to keep 15 days operating stocks. By the government abolishing SRF, the measure has been discontinued because the cost of keeping such stocks was removed from the fuel cost build-up in October last year.

"Government said it would keep such stocks," according to the ERB Status report on Petroleum sector.

"However, the government is currently still constructing storage facilities for such stocks. Once the storage facilities have been constructed and the strategic reserves procured, security of supply will be enhanced. ERB supports rehabilitation and construction of storage facilities by the government countrywide."

The Status report on Petroleum sector stated that ERB has developed a licence to allow the private sector to construct and operate storage facilities as a business.

"While the downstream petroleum sector has evolved over the years, the spine of the Zambian fuel supply chain has remained to be TAZAMA and INDENI. More than anything else, these two installations have the greatest impact on the profile and performance of the Zambian petroleum industry," stated the report.

"As long as the feedstock which is imported for Zambia continues to contain a higher proportion of diesel than was initially envisaged, the cost of fuel in Zambia will be higher than that obtaining in neighbouring countries. Zambia therefore needs to address this structural problem if the high prices of fuel are to be contained."

And the status report observed that high fuel taxes worsened already high pump prices in the country.

"The high taxes charged on fuel, and the ad volerum nature of these taxes only further accentuate the situation," the report read in part.

"With every rise in the pump prices, the amount of taxes collected by government per liter of fuel also increases, placing a never ending burden on the consumer. If the taxes were absolute amounts, citizens would have a relief and prices would not be as high."

Meanwhile, the ERB status report stated that while there were increasing calls for Zambia to consider sourcing her petroleum requirements from alternative sources such as Angola, the numerous challenges presented by such options need to be well understood.

"The Angolan option would call for construction of a pipeline/rehabilitation of the Bengwela railway line and the upgrading of Indeni to crude refining capacity," stated ERB.

"Since Angola also imports her finished products requirements, she may not be in a position to supply Zambia with finished products. Given the lead times for pipeline construction, the Angolan Option may not offer an immediate or short term solution to the challenges faced by Zambia. Further, most oil shipping companies are concentrated in Western Europe, the Middle East and Asia Region."

Labels: ERB, FUEL, OIL

posted by MrK @ 5:27 PM