Page 5 - AfrOil Week 05 2023

AfrOil COMMENTARY AfrOil

The relationship between Angola and Zambia 25% import duty on gasoline and low-sulphur
has been developing rapidly since 2016, when diesel. According to the country’s Policy Moni-
the countries signed a bilateral trade agreement, toring and Research Centre (PMRC), to deter-
with a 2022 deal further strengthening rela- mine fuel prices, Zambia’s “Energy Regulation
tions by introducing duty-free trade for certain Board (ERB) uses the Cost-plus Pricing Model
products. (CPM), which operates on the principle that the
At the time, Zambian Minister of Com- final price of petroleum products should cover
merce Chipoka Mulenga called the agreement all the costs incurred in the supply chain.”
a “game-changer.” He said: “Economic and With that in mind, it said that oil market-
trade relations should be anchored on co-ex- ing companies (OMCs), as fuel marketers are
istence among private sector players as vehicles known, “rarely import finished products due to
through which poverty eradication and eco- the high import duty.” The majority of finished
nomic growth can be attained.” products are imported by rail or road from
The minister added that there was also a need neighbouring countries.
to utilise the two countries’ natural resources Diesel is understood to account for around
and geographical proximity as vehicles through two-thirds of total Zambian fuel consumption
which trade relations could be developed fur- – led by transport and mining – and though the
ther. His Angolan counterpart, Victor Fernan- government continues to support consumers
dez, similarly noted that “trade and bilateral with the 2021 removal of VAT on both gasoline
co-operation are essential for the sustainable and diesel, this is set to be reintroduced follow-
growth of countries.” ing consultations with the International Mone-
It comes as no surprise, therefore, that tangi- tary Fund (IMF) in September.
ble progress has been seen in the oil and energy Kapala added: “If all these subsidies were on,
sector too. the current price could have hit ZMW34 [$1.80]
per litre of petrol, so we are mindful of that. The The
Zambia’s position next phase of procuring petroleum products is
Being landlocked, Zambia is highly susceptible where we say: ‘OK, all subsidies taken out, this is relationship
to supply pinches, and diversifying fuel sources the pricing and we buy in bulk.’ Buying in bulk
is clearly in its best interests. At present, the will be cheaper. We should be able to reduce on between
country imports most of its fuel from the Mid- the pump price.” Angola and
dle East, through the Tanzanian port of Dar es Meanwhile, in order to provide some shel-
Salaam, which is connected to the local 40,000 ter from global supply and price shocks, work is Zambia
bpd Indeni refinery by the 1,710-km Tanza- ongoing to establish fuel depots with the immi-
nia-Zambia (Tazama) oil pipeline. nent launch of a unit at Chipata and another has been
Indeni has struggled with maintenance and 100mn litre facility being built in Lusaka.
supply issues, reducing its effective capacity to developing
around 24,000 bpd, covering less than half of African ambition rapidly since
the country’s refined product requirements. As of year-end 2021, Africa had a combined
Workers at the facility are set to be made redun- theoretical refining capacity of 3.72mn bpd. 2016
dant as the plant is converted from refinery to a Egypt leads the way with just under 900,000
blending unit to handle low sulphur diesel amid bpd, followed by Algeria, South Africa, Nigeria
a sectoral reform by Hichilema’s government. and Libya, according to a report by GlobalData.
Zambian Energy Minister Peter Kapala said
last year: “Indeni will soon go into production However, this includes various assets that
of a feedstock that is already in the pipeline, have since been mothballed, damaged or are
that pipeline will be used for low sulphur diesel undergoing long-term maintenance projects,
importation which will help reduce the pump most notably those in South Africa and Nige-
price. So Indeni will move from what it is into ria. The report suggests that 53 new refineries
another mode of oil marketing. They must also are expected to launch by 2026, almost doubling
be given an opportunity provided on how the the total capacity figure to 7.28mn bpd.
business will run to start producing ethanol While the launch this year of Nigeria’s
because we plan to start blending petrol this 650,000 bpd Dangote unit will boost the total,
year. There is a plant already in Lusaka starting achieving even 80% of the nameplate capacity
to produce ethanol.” across the continent is a stretch and such figures
Under plans first announced in 2021, Tazama for growth are fantastical.
is to be converted to transport refined products, Investment in newbuild refineries will also
while plans are in place to develop a natural gas have to compete with the $15.7bn the African
import line along the same route, and a visit to Refiners and Distributors Association (ARDA)
Dar es Salaam in December saw the neighbours has estimated will be required to upgrade the
discuss joint efforts to ensure the security of existing slate and produce less polluting fuels.
these conduits. Speaking to NewsBase, Douglas McDonald,
Kapala said at the time: “It’s a new and posi- research analyst at UK-based consultancy IGM
tive development that Zambia will get its diesel Energy, said: “Hichilema has a point. Consider-
through the Tazama pipeline as opposed to the ing its hydrocarbon wealth and upstream pro-
usual crude. This is not a small achievement.” duction, Africa should be able to refine enough
Indeed, it marks a major change in approach products to cater to far more than the roughly
for Zambia, which on January 1 scrapped a 30-40% of demand it does at present.”

Week 05 02•February•2023 www. NEWSBASE .com P5