Page 5 - DMEA Week 05 2023

DMEA OPINION DMEA

while plans are in place to develop a natural gas leads the way with just under 900,000 bpd, fol-
import line along the same route, and a visit to lowed by Algeria, South Africa, Nigeria and
Dar es Salaam in December saw the neighbours Libya, according to a report by GlobalData.
discuss joint efforts to ensure the security of However, this includes various assets that
these conduits. have since been mothballed, damaged or are
Kapala said at the time: “It’s a new and posi- undergoing long-term maintenance projects,
tive development that Zambia will get its diesel most notably those in South Africa and Nigeria.
through the Tazama pipeline as opposed to the The report suggests that 53 new refineries are
usual crude. This is not a small achievement.” expected to launch by 2026, almost doubling the
Indeed, it marks a major change in approach total capacity figure to 7.28mn bpd.
for Zambia, which on January 1 scrapped a 25% While the launch this year of Nigeria’s
import duty on gasoline and low sulphur gasoil 650,000 bpd Dangote unit will boost the total,
(diesel). According to the country’s Policy Mon- achieving even 80% of the nameplate capacity
itoring and Research Centre (PMRC), to deter- across the continent is a stretch and such figures
mine fuel prices, Zambia’s “Energy Regulation for growth are fantastical.
Board (ERB) uses the Cost-plus Pricing Model Investment in newbuild refineries will also
(CPM), which operates on the principle that the have to compete with the $15.7bn the African
final price of petroleum products should cover Refiners and Distributors Association (ARDA)
all the costs incurred in the supply chain.” With has estimated will be required to upgrade the
that in mind, it said that oil marketing compa- existing slate and produce less polluting fuels.
nies (OMCs) “rarely import finished products Speaking to DMEA, Douglas McDonald,
due to the high import duty”. The majority of research analyst at UK-based consultancy IGM
finished products are imported by rail or road Energy, said: “Hichilema has a point. Consider-
from neighbouring countries. ing its hydrocarbon wealth and upstream pro-
Diesel is understood to account for around duction, Africa should be able to refine enough
two-thirds of total Zambian fuel consumption products to cater to far more than the roughly
– led by transport and mining – and though the 30-40% of demand it does at present.”
government continues to support consumers However, he added: “Zambia’s bargaining
with the 2021 removal of VAT on both gasoline position is not the strongest: relying on its neigh-
and diesel, this is set to be reintroduced follow- bours for imports. With Middle Eastern state-
ing consultations with the International Mone- owned oil firms shipping large product volumes
tary Fund (IMF) in September. to Dar es Salaam, Lusaka’s fuel fate depends on
Kapala added: “If all these subsidies were on, deals done by the government of Tanzania.”
the current price could have hit ZMW34 [$1.80] Meanwhile, the economics of intra-continen-
per litre of petrol, so we are mindful of that. The tal sales provide a challenge to major refinery
next phase of procuring petroleum products is investments, particularly those, like Dangote,
where we say ‘ok, all subsidies taken out, this is that are being built to focus on export mar-
the pricing and we buy in bulk’. Buying in bulk kets with higher quality fuel specifications. For
will be cheaper. We should be able to reduce on Zambia, export parity pricing in addition to its
the pump price.” existing CPM is likely to necessitate continued
Meanwhile, in order to provide some shelter subsidies.
from global supply and price shocks, work is McDonald concluded: “The Lobito option
ongoing to establish fuel depots with the immi- holds great appeal for both parties – investment
nent launch of a unit at Chipata and another and guaranteed offtake for Sonangol and a new
100mn litre facility being built in Lusaka. product stream for Zambia. However, given the
years the industry has been waiting for the refin-
African ambition ery to be built, and the time required to complete
As of year-end 2021, Africa had a combined the- both it and a 1,400-km pipeline, even the 2025
oretical refining capacity of 3.72mn bpd. Egypt timeline appears ambitious.”™

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