Wilfred Edwin
16 November 2009
Nairobi — A new state-owned firm is set to enter the lucrative Tanzanian oil marketing business which, since its liberalisation in 1999, has been in the hands of the private sector.
The Commercial Petroleum Company of Tanzania Ltd, which will be a subsidiary of Tanzania Petroleum Development Corporation (TPDC), set up to specifically importing bulk oil into the country, will start a new era in the oil sub-sector, whose operators have been accused of forming price cartels and fuel adulteration.
To ensure its sustainability, however, Copec will have to enter into a joint venture with a private firm.
Already, the TPDC tender board has floated an international tender inviting interested firms or consortia.
Yona Killagane, the TPDC managing director, told The EastAfrican last week that the joint venture will be responsible for the importation and distribution of petroleum products within and outside the country.
Mr Killagane said Copec will work just like any other oil marketing firm in the sector.
The formation of Copec comes almost three years after the original decision for the government to enter the oil business was made.
Sources however told The EastAfrican last week that, owing to the time taken to implement it, there are suspicions of powerful political forces trying to thwart the bid.
The re-entry of TPDC into the oil business is aimed at stabilising the sector's operations, enhancing security of oil supplies in the country and maintaining price stability.
A survey by the Energy and Water Regulatory Authority has shown that bulk procurement of oil through term tenders had helped stabilise consumer prices in countries like South Africa, Namibia and Mozambique.
TPDC had earlier wanted bulk procurement carried out either jointly by oil importing companies or by a single player to achieve lower consumer prices for the commodity.
TPDC long ago submitted its business plan and a Cabinet paper on oil trading and a strategic petroleum reserve procurement scheme.
The Cabinet is said to have reviewed the proposals and directed TPDC to submit an implementation report, indicating that the corporation's working capital will be taken into account in the next financial year.
The re-entry of TPDC into the lucrative oil business is the result of an unprecedented three-year-long fuel price rise that has caused fears of the national economy grinding to a halt.
In addition, through TPDC the authorities will be able to collect accurate oil importation data for taxation and other purposes.
The corporation's role was previously that of overseeing and developing infrastructure for storage and transportation of petroleum in the country.
Besides the oil business, TPDC also spearheads Tanzania's efforts to introduce the first ever natural gas compression plant to power motor vehicles and for domestic use.
The shift is expected to halve both the cost and dependence on charcoal and petroleum products, hence reducing gas emissions and the cost of living.
Until June this year, the country had saved more than $1 billion from the use of natural gas in electricity generation and industrial production.
According to Mr Kilagane the pilot project had targeted to provide compressed natural gas to 30,000 households and 8,000 cars in Dar es Salaam, before it spreads across the country during the second phase which is pegged on availability of funds.
The project will greatly reduce the country's reliance on imported liquefied petroleum gas, petrol and diesel for both cooking and running cars.
"This project will minimize the impact of environmental degradation and save huge amounts of money spent on fuel imports and it will also help reduce poverty," explained Mr Kilagane.
Exploitation of the natural gas will greatly depend on lowered costs that must come from government tax waivers on compressors, dispensers, conversion kits and cylinders in order to reduce service costs.
However, only cars running on petrol will be compatible with gas conversion kits, and that already six cars had been converted by last week at a cost of $1,200-$1,500 depending on the size of the vehicle.
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