Lack of 50bn/- hits key fuel supply plan

A year after it was licensed to operate, the state-owned Commercial Petroleum Company of Tanzania (Copec) is struggling to raise the Sh50 billion it needs to officially start operations.

The Energy and Water Utilities Regulatory Authority (Ewura) granted Copec the business licence in September last year in a development meant to breathe life into the company formed to ensure that Tanzania has enough fuel stocks at all times—unlike the current situation where shortages (both incidental and genuine) are common.

A year down the road, though, The Citizen has established that the company subsidised by the Tanzania Petroleum Development Corporation (TPDC) is active only in the books.

The TPDC principal marketing officer, Mr Leo Lyayuka, told The Citizen yesterday: “We are looking for finance. We are discussing better terms to get funds. According to our preliminary projections, we are still scouting for at least Sh50 billion to implement our business plan.”

Without mentioning names, Mr Lyayuka said the government has been engaging potential financial institutions to secure the much-needed funds.

Copec was set to run business not on pure profit motive but to lessen handicaps, such as the perennial fuel crises, that have affected the national oil market.

The need for Copec was underlined earlier this month when the country found itself caught up in a “manmade” fuel shortage for almost three weeks, prompting Ewura to demand that the 15 licensed oil importing companies explain why they should not be penalised after they triggered a fuel shortage.

According to Mr Lyayuka, the national oil company is important especially at a time when the country is embarking on heavy and long term investment in the petroleum sub-sector. This includes construction of oil pipelines to connect with upcountry regions that traditionally pay higher petroleum prices due to transport costs.

Copec is meant to be operating under the existing oil marketing conditions governed by 2008 Petroleum Act and operating regulations.

There are at least 15 major oil marketing companies operating  in Tanzania, including Tanga Petroleum Co. Ltd, DFCG International Ltd, Mohammed Twalib Petrol Station Ltd, Petro (T) Ltd, Amazon Petroleum, Danvic Petroleum, Petrol Sol (T) Ltd and Bright Sta Energy Co. Ltd.

Others are EXCO Oil Co. Ltd, Petromark Africa, Oil Link (T), Riva Oils (T) Ltd, Metrol Petroleum (T) Ltd, Afroil Investment Ltd and Swiss Singapore Oversees Ltd.

On Copec’s place in the bulk oil procurement system under the Petroleum Importation Company (PIC), the senior TPDC official said it would interact with other oil marketing companies because PIC is just a system of picking one bulk oil importer on behalf of others.

Policymakers and experts have repeatedly raised concerns that delays in kicking off Copec have affected the country’s capacity to cushion itself from risks arising from the volatile domestic and global market for petroleum products.

Recently, the minister for Energy and Minerals, Prof Sospeter Muhongo, said the government was working on a lasting solution to the fuel crises, which have had a knock-on effect on the national economy.

In his recent comments, a senior lecturer in business studies at Mzumbe University’s Dar es Salaam’s campus, Dr Honest Ngowi, said that since fuel prices are highly volatile due to fluctuations on the world market and an unstable exchange rate between the shilling and US dollar, it was necessary to have future or forward contracts between national buyers and suppliers of fuel to mitigate price hikes.

“Fuel price instability is a big source of frustration in budgeting, planning and implementation of the same,” Dr Ngowi said. “Stable fuel prices are good in predictions of many economic fundamentals. That is why strategies to stabilise prices are long overdue.”

Contracts stipulating pre-determined and stable prices in a specified period can significantly contribute to stabilise fuel prices, according to the lecturer.
Source: The Citizen, http://www.thecitizen.co.tz , reported by  Ludger Kasumuni in Dar es Salaam


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