M’membe raises 10 questions over ‘cheap’ Indeni diesel
By Rhoda Nthara
SOCIALIST Party president Fred M’membe is seeking clarity on the “coming Indeni cheap diesel” from the government.
“Has the government abandoned the policy of allowing OMCs (Oil Marketing Companies) to import fuel and only play an oversight role via ERB (Energy Regulation Board) or are we moving to Indeni being a sole importer and selling locally to OMCs at lower prices given the anticipated transportation efficiencies occasioned by using the Tazama pipeline?” he asked.
“While every effort to bring down the prices of fuel deserves support, we feel the announcement by the Minister of Energy [Peter Kapala] that diesel prices will drop following the dismantling of Tazama pipeline stock, which Indeni is now processing, raises a number of concerns.”
Dr M’membe wondered whether it is being assumed that Indeni production “will meet total country demand and therefore become a single reference price point”.
“Will Indeni’s currently installed processing capacity meet total country demand? Where does this leave the…sector oil marketing companies (OMCs), and what price will they sell given that their price reference point is a spot price, which is likely to be higher than Indeni’s price? How will these two different prices be reconciled to arrive at a national uniform pump price, which is currently in place? Fast forward, after processing the initial commingled product, which has now been flushed out of the pipeline, it is expected that the finished product will now be pumped. Can we conclude that this Indeni processing is a one-off affair? If diesel is the finished product to be pumped through the Tazama pipeline, does it mean they supply enough to meet total country demand, and will the same be availed to OMCs, as we assume they will have to buy the diesel from Indeni?” asked Dr M’membe.
“A potential huge price differential is likely to arise between diesel and other products – petrol, kerosene, heavy fuel oil etc – as these will have to be imported on spot price. What are the consequences of this? Or shall we assume that Indeni imports via the pipeline are interchangeable, and both diesel and petrol will be imported by Indeni as an oil marketing company and national demand will be met? Should this not be the case in 8 above, how will products imported by OMCs be priced? Has the government abandoned the policy of allowing OMCs to import fuel and only play an oversight role via ERB, or are we moving to Indeni being a sole importer and selling locally to OMCs at lower prices given the anticipated transportation efficiencies occasioned by using the Tazama pipeline? We need clarity on this matter so that citizens are aware of the impact. And by the way, we have spoken to someone at Indeni who has confirmed that a group of production workers have been given two-month contracts to process the commingled feedstock, which was stuck in the pipeline. So the current processing is a temporary measure after which finished products will be imported.”