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Ethiopia: Petroleum Companies Request Profit Margin Review
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Addis Fortune (Addis Ababa)
28 January 2008
Posted to the web 28 January 2008
Issayas Mekuria
The five petroleum supplying companies currently active in Ethiopia requested the revision of the profit margin on petroleum products they distribute. Executives of National Oil Company Plc (NOC), Shell Ethiopia Limited, Total Ethiopia SC, Kobil Ethiopia and Yetebaberut Beherawi Petroleum (YBP) also requested a price adjustment on lubricant prices.
These companies were instructed by the Ministry of Mines and Energy (MoME) early this month to sign an agreement with the Sudanese Nile Petroleum and supply blended fuel processed at the company's depots in Sululta, 25Km from Addis in the Oromia Regional State.
Agreeing to the Ministry's instruction, the companies also forwarded what seems to be a precondition for signing the agreement with Nile Petroleum.
"We, the marketing oil companies, in order to invest in the upgrading of our facilities and get ready for the ethanol operations without delays, have to secure the approval of our respective shareholders, which in turn are expecting an increase in the margins," reads the letter addressed to Ahmed Tusa, state minister of Trade and Industry, on January 14.
The government has long envisioned seeing the blending of benzene with the by-products of the country's three sugar factories - Metehara, Wonji Shoa and Finchaa. Though YBP signed a memorandum of understanding (MoU) with Finchaa in 2005 to blend benzene with the ethanol of the factory and distribute it to the market, it did not materialise.
The government later granted the blending rights to Nile Petroleum. Accordingly, MoME, through the Ethiopian Petroleum Enterprise (EPE), instructed the oil companies on January 10, 2008, to sign an agreement with Nile Petroleum and distribute the blended fuel.
"We agree to MoME's instruction for us to sign an agreement with Nile Petroleum to guarantee their investments in the depot for the blending of ethanol," replied the executives.
The margin the oil companies currently collect from bezene (0.0595 Br/lt), diesel (0.0583 Br/lt) and kerosene (0.0513 Br/lt) according to them does not even cover costs. Though they have been recurrently requesting its adjustment, is has not been revised so far.
"We therefore kindly request that the formula on the price structure of petroleum products be revised and implemented at the earliest possible time," they solicited.
The letter was also copied to Girma Birru, minister of Trade and industry, Alemayehu Tegenu, minister of MoME, and Yigzaw Mekonnen, director general of EPE.
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The request was signed by Tadesse Tilahun, general manager of NOC; Bernard Lacaze, managing director of Total Ethiopia; Yoaz Zilber, general manager of Kobil Ethiopia; Jean Pierre Vyns, general manager of Shell Ethiopia; and Desalegn Alemayehu, general manager of YBP.
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