Page 5 - Downstream Monitor - MEA Week 35

DMEA Commentary DMEA
Mozambique, said that bases would be built in Beira and Matola for LPG storage and onward transportation to Botswana, Congo (Brazza- ville) and Zimbabwe, adding that the facilities would offer “greater security and reliability” of LPG supply. During a meeting with Portugal’s Deputy Economy Minister Pedro Siza Vieira he said that the Matola terminal would “enhance the use of port and rail facilities to the benefit of Mozambique”.
The new units will give Galp four logistics hubs in the country as well as 120 fuel stations.
In Q1 this year, several companies expressed their interest in building a products pipeline from Beira in Mozambique to Zimbabwe’s capi- tal Harare to enhance fuel supply security.
The pipeline is estimated to cost more than $1bn and has been in the works since 2014 but little progress has been made, as the plan is still being evaluated in Harare.
Zimbabwe has sought greater investment because the landlocked country has faced severe shortages of petroleum products, partly caused by transport constraints and scarcity of foreign exchange required to finance imports, leading to long queues at fuel stations.
Around 90% of fuel used is piped through the Beira-to-Feruka pipeline, which is operated by Mozambique’s CPMZ Holdings.
race to the bottom
A lack of access to reliable mid- and downstream infrastructure has brought significant problems for sub-Saharan governments in the form of sub- sidies, and while some states have made progress in this regard, albeit painfully, others continue to lag behind.
Zimbabwe is an example of the latter and the government last week reduced its ceiling for motor fuel prices, marking the first weekly decline since January 13.
In a statement, the Zimbabwe Energy Regula- tory Authority (ZERA) published a weekly pric- ing schedule for gasoline and diesel, saying that the new rates would take effect on September 2. According to the document, fuel sellers can now charge no more than ZwD10.25 ($0.0283) per litre for gasoline and ZwD9.86 ($0.0272) per litre for diesel.
Under the previous schedule, which was issued on August 26, ZERA had capped the price
of gasoline at ZwD10.32 ($0.0285) per litre and diesel at ZwD10.01 ($0.0277) per litre.
The government agency explained its deci- sion to bring the price ceiling down as a con- sequence of “FOB price movements and the revised duty regime (SI 161 of 2019) applicable from September 2.” This was not necessarily revealing, since ZERA has used nearly identical phrasing in multiple weekly pricing decrees this year.
The price cut may bring some relief to Zim- babwean consumers, who have seen motor fuel prices rise substantially over the last two years. But it does go against the wishes of Finance Min- ister Mthuli Ncube, who has said he would like motor fuel prices to be closer to $1 per litre.
Zimbabwe’s government has subsidised gas- oline and diesel prices to keep them far below world market levels for many years. This policy helped exacerbate shortages in the country by giving local traders an incentive to smuggle fuel bound for Zimbabwe to neighbouring countries, where it can be sold for a much higher price.
ZERA recently took a tentative step towards correcting the situation by introducing different fuel pricing schedules for different regions of the country. It explained its decision by stating that it was trying to factor in the cost of trucking gasoline and diesel into different cities and geo- graphical zones. Prices will now be highest in the Victoria Falls region.
focus on security of supply
Recent fuel shortages have also been experi- enced in Madagascar, where the local hydrocar- bons agency (OMH) last week announced a new strategy for the supply and distribution of fuel across the island.
Northern Madagascar has suffered from shortages because of contract negotiations between tankers and marketers.
In a statement, OMH director-general Lau- rent Rajaonarivelo said that during periods of peak demand it was “imperative” to take steps to strengthen distribution capabilities to areas with high tourism rates. He noted that this care and forethought was particularly important with the upcoming visit of the Pope.
Rajaonarivelo added that the measures put in place had reduced the supply risk without increasing prices at the pump.™
Fuel scarcity is common throughout East Africa and more investment by host governments
is required to improve stability of supply.
Week 35 05•September•2019 w w w . N E W S B A S E . c o m
P5