ZAMBIAN OIL SECTOR MESS NEEDS ATTENTION
O Dear Editor,
N Sunday Interview of 02/06/2019, I watched the permanent secretary of the Ministry of Energy at pains trying to explain her way out of the myriad problems that have beset the Zambian oil sector.
She agonisingly wrung her hands as Gravazio Zulu assaulted her with uncomfortable questions.
When Gravazio told her that he was moving away from fossil fuels to Bio fuels she literally breathed a huge sigh of relief, thankfully smiled and was more at ease. Such is the state of the Zambian oil sector.
I will start with her vehement denial of the existence of middle men in the procurement of crude oil.
Her explanation was that her ministry strictly follows the ZPPA procedure of flouting tenders for the purchase of crude oil and potential suppliers then submit their bids, after which the best bid is selected to procure the crude and supply to Tazama.
Now the point is that the very fact the Ministry is not buying crude oil from the producer, but from a second party, or third for that matter, means the Ministry is using middlemen, irrespective of whether tender procedures are adhered to or not.
Therefore Government is still using middlemen for the procurement of crude oil, and that comes at a cost, the middleman’s margin.
This is reflected in the pump price. Zambians are bearing the extra cost of Government not purchasing crude oil directly from producers.
The glaring question is; why doesn’t Government buy crude oil directly from producers?
She also talked about the planned pipeline from Angola to Zambia for the importation of refined petroleum products.
You don’t need a rocket scientist to tell you that this is a bad idea. To start with it will take forever to get this project off the ground as there is a lot of preliminary, as well as preparatory work to be done.
Secondly it is going to be very, very expensive to construct. Thirdly the period of construction will be very long. Fourthly it will be very dangerous and risky.
Both during construction, because of the terrain it will pass through, and when operational, because of the state of the product that will run through the pipeline.
The pipeline is expected to run through the region of Angola that experienced the worst part of the civil war. This region is awash with land mines, undetonated bombs and other forms of explosives.
Then pumping petrol through a pipeline of that length is going to lead to major loses through leakages, petrol being an extremely light liquid, as well as loses through theft, petrol being a ready to use product.
Petrol is highly flammable; therefore the potential for disaster is very high. The pipeline will be exposed to bush fires over most of its length which will inevitably lead to explosions.
Now herein lies both the problem and the much needed solution to a lot of what is happening in the Zambian oil sector.
Problem; lack of Government support. The President has been making clarion calls for Zambians to get involved in the industrialisation of this country, and rightly so.
Yet here is a Zambian company (Ng’omark Ltd), owned by an indigenous Zambian (Patrick Ng’oma) not getting the required support from the very Government.
Very ironical indeed. According to the story Ng’omark Ltd has received offers and written expressions of interest from global banks and organisations to fund the project.
Ng’omark Ltd is requesting for Government to guarantee a market for its products, and I quote,” We require some protection to get market access for our refined petroleum fuels”,
“We need Government’s assurance for some protection as a local refinery to have priority access to the market before any importation is allowed”. End of quotes.
It would appear that only when this “assurance” is obtained will the funding be secured. Surely is this too much to ask for?
As a matter of fact it is a right, being an indigenous company. Just like my children have a right to my protection for whatever they need to further their development and progress in life.
I also mentioned that this is the much needed solution.
I say so because a lot of the problems being experienced in the oil sector will be done away with.
Initially the company will produce an estimated 60% of what is currently being imported, and being a modular refinery will most definitely expand to increase production to preclude the need to import any more finished products.
The Government ought to be enthusiastically embracing this initiative. As a matter of fact they should be going out of their way to ensure its success, and this is why; The Company will create both direct and indirect jobs.
Government will no longer be required to import fuel, translating into less pressure on the treasury vis a vis demand on foreign exchange.
ZRA will have no headaches in relation to smuggling and misclassification of petroleum products and there will be an overall marked increase in tax collection from the oil sector.
The refinery will improve the country’s energy security situation. Ng’omark Ltd will guarantee product quality, unlike the situation with imported fuel.
The crude oil for Ng’omark Ltd will either be brought in by Tazara or Tazama. This translates into much needed extra revenue for these government entities, particularly so for Tazara, which is currently in a coma.
The dangerous and inconveniencing situation at the Lusaka Bulk Fuel Terminal will be put to an end. The revenue generated by Ng’omark Ltd will remain in this economy. Surely this is a no brainer.
To conclude I strongly urge the Ministry of Energy to revisit their initial lacklustre, flippant, careless and irresponsible response.
They must provide the assurance that Ng’omark Ltd requires. As for Mr Ng’oma, should the Ministry of Energy sit on its hands and continue being intransigent, I advise you to escalate the matter to the President; he appears to be the only one genuinely interested in locally driven industrialisation.