Zambia braces for potential fuel shortage

The government and the Energy Regulatory Agency have joined hands to persuade the private sector into setting up strategic reserves to cushion the negative impact of the impending shutdown of the 33-year-old refinery. Energy Regulation Board spokesperson Yammi Zimba said modalities had been worked out to ensure adequate stocks were available in the country to meet the demand for petroleum products after the August shutdown. Zimba said all oil marketing companies (OMCs) would be required to start holding 15-day operating stocks besides collecting 152 kwacha (US$0.5 cents) per litre sold to build up funds for the “belated” strategic reserves to be set up before the end of the year. “We have worked modalities in collaboration with the government on the importation of petroleum products into the country to avoid fuel shortages,” she said in a statement obtained in Lusaka. The shutdown of the refinery would, however, not affect the price of petroleum products because it was determined by the world market prices coupled with the prevailing exchange rate of the local currency against other convertible currencies. However, several companies ‘ particularly in the mining sector ‘ have taken caution and are stocking various fuels to avert the shortage experience last year when the oil refinery was shut down on September 9. On the Copperbelt, major foreign investor owned mining companies, Mopani Copper Mines, Ndola Lime, Konkola Copper Mines and First Quantum, have made alternative arrangements with OMCs to import and stock petroleum products particularly heavy oil fuels and diesel, which cost them profits on their production. Sources at the affected firms said arrangements had been made with OMCs to deliver huge stocks of petroleum products to sustain operations because they were uncertain of the period the maintenance of the refinery would last. Earlier, the Energy and Water Development Minister said the government was working in collaboration with the private sector to set up strategic reserves by June and ensure self-sufficiency. There are, however, no reports on how far the programme has gone. But sources within the Ministry of Energy attributed the delay to set up the strategic reserves to insufficient funds to undertake the project. The strategic reserves would be in Livingstone in Southern Province, Lusaka and Kitwe, about 370 kilometres from the Zambian capital. The shortage of the commodity cost the mines, which maximise on diesel and heavy oils for their operations, losing them an average of US$20 million in profits per month. During the closure, the government, through OMCs, imported more than 500 million litres of diesel, paraffin, petrol and heavy oils, although it reached end users late. Motorists and other users of petroleum products were forced to spend several days at filling stations in several parts of the country because of the shortage. Total International, an equal partner in the country,s refinery, complained at the government’s delay to invest in the refinery leading to persistent breakdowns and closures and affected production of petroleum products. Total had last year argued that despite the 50-50 per cent shareholding in Indeni Oil Refinery, the government had “forgotten” its obligation to recapitalising the plant.

June 2006
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