Bots looks to Angola for oil


Gaborone –  Botswana is mulling over importing oil from Angola – the second largest oil producer in sub-Saharan Africa, behind Nigeria.

Angola experienced an oil production boom between 2002 and 2008, as production started at several deep-water fields.

Botswana Oil Limited Chief Executive Officer, Willie Mokgatlhe, confirmed Botswana’s intention to import oil from Angola soon.

Apart from Angola, Mokgatlhe said the state-owned oil company will engage oil-producing countries, which he did not name but Angola will be given priority.

According to Makgatlhe, the move would enhance the company’s supply strategy as it is part of implementation of alternative supply routes and sources which they are currently pursuing.

Botswana is expected to benefit from the deal since the two southern African countries are in the SADC region.

“These are early days yet but an Angola-Botswana oil deal would likely feature a cross-border pipeline,” said Makgatlhe.

Botswana Oil Limited realises the need for adequate primary transport and secondary distribution infrastructure to ensure security and efficiency of fuel supply to both urban and rural communities, he said. A cross-border fuel supply pipeline, he said, would support the realisation of this objective. “However, due to the diversification of sources of fuel product, coupled with current budget constraints, delivery of this project will most likely be executed at a later stage, potentially through a private-public partnership,” said Makgatlhe.

Touching on a topical issue following the launch of his company last month by President Ian Khama, Makgatlhe revealed that the national oil company will not subsidise fuel.

“As an entity active in the petroleum industry, Botswana Oil Limited’s pricing structure is based on the basic fuel pricing (BFP) mechanism, which is the cost of importing fuel into the country,” he said.

BFP, Makgatlhe explained, is influenced by the daily international market price of fuel.

“The Botswana Oil Limited pricing structure will therefore be aligned to international pricing market trends and will not be subsidised. It is worth noting that fuel prices in Botswana are regulated by government through the Control of Goods, Prices and Other Charges Act.

Reports indicate that fuel is subsidised in over half of the sub-Saharan African countries. The World Bank noted that on average, Sub-Saharan Africa’s fuel subsidies consume nearly 1.5 percent of GDP.

The International Energy Agency (IEA) estimated that in 2010, only 8 percent of the US$410 billion in subsidies went to the poorest 20 percent of the population.

The agency says that these figures underscore the inequitable distribution of subsidy benefits and the inefficiency embedded in subsidy programmes, especially consumption subsidies.

All too often fuel subsidies sharply contrast with the proportion of public spending on sectors like health.

Angola and Nigeria account for three-quarters of total sub-Saharan oil production. Nigeria has consistently been the largest oil producer in sub-Saharan Africa while Angolan oil production has quadrupled since 1990, reaching 1.8 million barrels per day in 2013, and accounting for 30 percent of total sub-Saharan production.

November 2014
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