By Amb. Emmanuel Mwamba
The Oil Saga, here is the complete Story
On 7th October, 2023, President Hakainde Hichilema apppointed veteran administrator, Peter Mumba as Permanent Secretary at the Ministry of Energy.
This decision was made because of a brewing crisis looming because of failure to obtain diesel supply for the month of September and October, 2023.
The Permanent Secretary
Like the supply of fertiliser, the oil sector attracts big boys with support heavy lobbying done through the President, State House aides and Ministers and their Permanent Secretaries and the casualties are usually civil servants as seen in this reshuffle.
On the latest debate on the oil crisis and its procurement, here are the details.
In July 2023, the Ministry of Energy offered opportunities to oil companies; Devon Oil Zambia Limited, Agro-Fuel Investments and Puma Energy Zambia PLC to supply Low Sulphur Gas Oil through the TAZAMA Pipeline for the months of September, October and November 2023.
DEVON OIL ZAMBIA LTD
Devon Oil is a thriving and upcoming local supplier.
On 22nd August 2023 Glencore Energy UK Ltd Director, Louise Bullen, wrote to Devon Oil Zambia to express interest to supply diesel to Zambia through Devon Oil. Glencore Energy offered 100million litres.
“We hope to be given the opportunity to discuss the terms of a potential supply of diesel during September 2023 through the port of Dar-es-Salaam.”
On 1st September, 2023 Devon Oil Zambia Managing Director, Mr. Chombe Gondwe accepted the partnership with Glencore Energy to supply fuel to Zambia in September 2023.
He promptly submitted the assurances to the Ministry of Energy.
On 1st September 2023, Ministry of Energy offered a contract to Devon Oil Zambia to supply 100,000 metric tonnes of diesel within the stipulated period of September 2023 through the TAZAMA Pipeline.
The Ministry was emphatic that Devon Oil Zambia was granted the approval but the authority would not extend beyond September 2023.
Devon Oil was were also reminded that the petroleum products must have a landed price below the Energy Regulation Board regulated wholesale price.
Devon proceeded to make arrangements with the TAZAMA and the pipeline was left free for the entire month of September to allow the company to use the period for importation of the commodity.
On 16th September, 2023 Devon Oil wrote to the Permanent Secretary at the Ministry of Energy to inform them that Glencore had advised Petroleum Bulk Procurement Agency of Tanzania about the nomination of Mt. Haima, an oil products tanker ship vessel, of its arrival dates between 26th September and 30 September 2023 at the Port of Dar-es-Salaam.
Devon also requested that the Energy Ministry in Zambia intervenes with authorities in Tanzania for the vessel Mt. Haima consigned by Glencore Energy UK ltd to be given priority berthing-a process of mooring a ship in its allotted place for it to discharge its cargo.
This allocation had to be at a Single Point Mooring, a designated place to accommodate deep draft tankers while they transfer crude oil or petroleum products.
On 18th September, 2023, the Permanent Secretary wrote an urgent letter to the counterpart, the Ministry of Energy and Minerals in Tanzania requesting the Vessel, Mt. Haima, be given priority berthing during the laycan (a ship’s arrival window) of 26th September and 30th September 2023.
The Permanent Secretary emphasized that in Zambia’s national and security interests, it was important that the vessel bringing fuel for the month of September was granted priority access to port facilities.
On 21st September, 2023, Eng. Felchesmi Mramba, Permanent Secretary in the Ministry of Energy, acknowledged that Tanzania had given Zambia increased and speedy access to port facility following the conversion of TAZAMA Pipeline to carry finished products.
He however, informed Zambia that Tanzania was facing a critical fuel shortage and had made long-term planning and the State-owned oil enterprise-Petroleum Bulk Procurement System, had lined up vessels in priority for the month of September to berth in order attend to the fuel crisis in Tanzania.
He stated that in view of the above and due to a very short Notice given to the authorities by Zambia and market supply challenges in Tanzania, the vessel Mt. Haima from Glencore Energy UK could not be given priority berthing.
He however stated that Tanzania would continue to assist the country on security of supply for the national interest of Zambia.
Fearing a shortage of fuel in the country, the Minister of Energy cancelled the offer and approval granted to Devon Oil Zambia on 1st September 2023 in which they were to supply Low Sulphur Gasoil by month-end.
The Minister reminded Devon Oil that their supply was restricted to the month of September 2023 and the company had failed to fulfil the terms of the contract.
Devon/Glencore ship Haima carrying 100metric tonnes of Gasoil was sold to a Tanzanian supplier called Augusta Energy who had a berthing slot for end of October for the Tanzanian market.
The tanker was sold to Augusta Energy of Tanzania.
AGRO-FUEL INVESTMENTS
In 2022, Agro-Fuel Investments Ltd was awarded to supply and deliver 100,000metric tonnes of Low Sulphur Gas Oil and 15,000 metric tonnes to finalize the conversion of the TAZAMA Pipeline to become a carrier of finished products.
The firm is also a local and Zambian owned company run by Shashikant Patel.
Shashi, as he is known in the private sector once ran one of the oldest Public Private Partnership concession, the Mpulungu Harbour.
Agro-Fuel has since obtained further contracts to supply diesel to the Ministry of Energy.
Recently, Agro-Fuel were notified by TAZAMA that the company would be unable to use the pipeline during the month of September 2023 as the facility had been granted to Devon Oil Ltd to use it for their importation of petroleum products during the September 2023 period.
TAZAMA advised Agro-Fuels to reschedule the use of the pipeline to October 2023.
In September, 2023 Agro Fuels managed to secure berthing time for their vessels to discharge 100,000 metric tonnes of diesel on 25th October and 27th October, 2023.
PUMA ENERGY ZAMBIA PLC
On 21st September 2021, PUMA Energy proposed that it was capable of supplying fuel to Zambia through TAZAMA Pipeline at a competitive and fair price. PUMA stated that the company could supply diesel within a period of 20 days if there were no challenges at the Dar-es-Salaam Port.
Recently the Ministry of Energy had also written to Puma Energy to confirm that following the company proposal to supply 100,000metric tonnes of Low Sulphur Diesel as proposed in their letter dated 21st September 2023 and has requested PUMA Energy to reconfirm delivery dates for their diesel.
IS THE PIPELINE HELPING IN THE PRICE OF FUEL
There has been marginal improvement in the pump price since the Tazama Pipeline online.
Before the TAZAMA Pipeline came on board to transport finished products, the pump price of diesel was higher than petrol.
PRICES OF FUEL BEFORE PIPELINE CONVERSION
For example, in January 2023, the pump price for Petrol was at K24.49 but diesel was selling at K26.44, In February 2023, petrol was K27.22 while diesel was at K29.25 and in March 2023, Petrol was selling at K28.52 while diesel was selling at K29.25.
PRICES AFTER PIPELINE CONVERSION
In April 2023, the pump price of petrol was K27.59 while diesel fell to K26.28. In May 2023 petrol was selling at K27.59 and diesel at K24.64.
In June 2023, the price of diesel was at K24.45 while diesel fell to K21.87. In July diesel was at K24.93 while diesel remained at K21.87.
In August 2023, Petrol was at K25.57 while diesel was priced at K23.36. In September 2023, Petrol was selling at K29.42 while diesel was at K26.88.
In October 2023, petrol was at K29.98 while diesel was just about K29.96.
As shown above, the price of diesel has fallen marginally down since the TAZAMA Pipeline came on board.
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