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What lies in bulk oil procurement?

27th December 2011
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Editorial Cartoon

Tanzania next week enters a new era in the importation of petroleum products – in the form of what is commonly known as bulk oil procurement.

This follows the recent picking of Swiss oil marketing company Augusta Energy of Geneva to do the job after the screening of scores of firms that applied for the contract.

Petroleum Importation Coordinator (PIC) chairman Mansoor Shanif Hiran says all is now set for the implementation of the new arrangement to begin.

“We have reached a milestone as a country and this project is bound to be successful,” he is quoted as having said.

Under the project, reportedly the most ambitious of its kind in Africa, the dealer is supposed to spend a whopping USD500m (equivalent to 850bn/-) to procure over 540,000 tonnes of crude within two months before a replacement is named.

Those in the know say the arrangement will help stabilise fuel supply and standardise prices.

As consumers eagerly wait to see things going, several questions remain unanswered regarding how the new modalities will work.

One question relates to the nature of the operations and the eventual outcome or consequences. Unlike the current oil importation system, where the country relies on individual importers, the new one will involve a single firm. This poses serious challenges in case the importer does not deliver as expected.

A similar system has succeeded in neighbouring Kenya, but there they have more than one importer.

There is also the issue of pricing. Already PIC officials, the importer, oil dealers and the Energy and Water Utilities Regulatory Agency (Ewura) have said there is no likelihood of fuel prices falling.

Yes, bulk importation is being introduced chiefly to ensure reliable oil supply and systematic oil business generally. But if these are in place and the prices still remain high, is there really any reason to introduce the system?

According to Mundis Index, oil consumption in Tanzania has been unpredictable and has kept rising over the past decade. While between 1980 and 2000 it was constant at less than 20,000 barrels (4,000 tonnes) per day, it has since been increasing and last year stood at 38,000 barrels (7,800 tonnes).

This scenario evidently needs to be re-examined as we embark on bulk oil procurement. Tanzania is 108th among the 206 consumer countries worldwide, as the US leads with 19 million barrels a day.

The share of consumption is both a measure and a symbol of the country’s level of development, and it’s high time we looked into this new posture by relating it to environmental pollution and carbon trade.

The other test for the new system is the cargo handling capacity at Dar es Salaam port, where only 35,000 tonnes can be cleared in three to four days. This is definitely a big challenge because oil handling will now have to be among the port’s main daily activities, even with the rehabilitation of the Single Buoy Mooring.

Given the fact that the neighbouring Uganda and Zambia are embarking on oil drilling, it is well worth considering putting up new centres for handling imported oil in Mbeya and Mwanza or Bukoba.

SOURCE: THE GUARDIAN
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