FUEL shortages which have often hit Tanzania–resulting in unexpected price hikes for diesel, petroleum and Kerosene–and the associated long queues at petrol stations, should be expected to repeat themselves.
Plans by the Tanzania government to establish a National Strategic Petroleum Reserve (NPR), whose aim is to stabilize the fuel market, seem to have hit a snag, at least for now, on account of Government reluctance to finance the project. The diesel, petroleum and Kerosene market in Tanzania is thus to continue running under private sector whims for a while longer.
Highly placed sources have confided that the government is still reluctant to provide funds to the Tanzania Petroleum Development Corporation (TPDC) to implement the NPR project, which needs a hefty USD 100 million (Tsh. 163 billion/-) to start running.
“The project requires millions of dollars which the government is not willing to dish out at present for the NPR to operate effectively,” a source who prefers anonymity told TZBusinessnews.com. “It should also have retail outlets to sell some of the imported fuel.”
This disclosure comes in the wake of press reports a couple of days ago which stated that a subsidiary of the Government owned TPDC–Commercial Petroleum Company of Tanzania (COPEC)–which was supposed to implement the NPR project, is among ten oil marketing companies which risk to lose operating licenses for failure to start operations.
COPEC was granted a license to sell petroleum products by the Energy and Water Utilities Regulatory Authority (EWURA) in August 2011 but it has since that time failed to start operations. Legislations covering the oil sub-sector require that a company which has been licensed by the industry regulator starts operations within six months.
“Yes, it is true that we have written to COPEC regarding the failure to start operations as required by the law,” EWURA’s Communications Manager Titus Kaguo was recently quoted as saying by some sections of the media.
Mr Kaguo noted however that any company that is granted a license and fail to start operations within the required period can be given a special consideration only if it has strong reasons to justify the delay.
COPEC had in September 2011, floated a tender for importation of 35,000 tonnes of petroleum products in which six foreign firms and one local company out of 25 firms which had expressed interests, submitted bids for the lucrative deal.
The TPDC Tender Board which was in charge of the tendering process announced later that none of the seven companies qualified for the deal.
Some industry sources however noted then that neither COPEC nor its parent company TPDC had the financial muscle to engage in the business.
This was disputed by the Director General of TPDC Yona Kilagane who maintained that the government was ready to pump money in the ambitious venture. However, this is yet to become a reality.
The TPDC Board Chairman Michael Mwanda said the process to establish the NPR ‘was a lengthy one which required thorough scrutiny’.
“We have to conduct due diligence on financial and technical capability of the bidding firms before embarking on the project,” Mr Mwanda explained.
Adding; “It is about making haste slowly as we do not want to repeat some mistakes that were made in the past.”
Creation of strategic oil reserves will help the country cushion itself from the kind of unexpected shocks which it suffered in 2011, when oil marketing companies hoarded fuel stocks after EWURA lowered prices for petroleum products.
“We also experienced fuel crisis during the late 1970s when Tanzania was at war with Uganda as a number of companies did not supply us with fuel and this is why the NPR is important,” he explained.
According to the industry regulator, Tanzania consumes 3.5 million litres of diesel, 2 million litres of petrol and 200,000 litres of kerosene per day.
Currently, the country’s reserves which are stoked by private oil marketing companies can only sustain consumers for between 10 and 15 days in the event of disrupted supplies.
Unstable oil prices at the World market, lack of storage facilities and exchange rate fluctuations are among challenges facing the oil sub-sector in Tanzania.
TPDC floated a tender for NPR mid last year in which 25 companies submitted bids but no firm has been awarded the lucrative tender yet. Under the terms of reference, the winning bidder will be required to import and supply fuel to COPEC.