Tanzania Daily News (Dar es Salaam)

8 July 2013

Tanzania: Strategic Oil Importation Tender At Risk

A TENDER for importation of oil by the Tanzania Petroleum Development Corporation (TPDC) for the National Strategic Petroleum Reserve (SPR) risks being cancelled after it emerged that the top two short-listed companies are a joint venture contrary to regulations.

The two companies, Swiss-based Vitol and Oman Trading International (OTI) came first and second in the tender. However, industry sources say that the Oman Shipping Company (OSC), OTI and Vitol had signed a memorandum of understanding to formulate a business partnership.

"The partnership provides for transportation requirements of OTI, mainly for the export of products out of Oman from Salalah Methanol Company and Aromatics LLC. This partnership was not disclosed during the tendering process as required by the law," a source said.

A total of 25 companies participated in the tender process for the lucrative deal. Some other companies that participated are Independent Petroleum Group of Bahama, Galawa Petroleum Limited and a local firm Prevail Technologies Tanzania.

Others are Trafigura Pte, Addax Energy SA Geneva and Augusta SA Geneva, both based in Geneva, Switzerland.

TPDC floated the tender for SPR in a bid to curb distortion of fuel prices in the local market by importers and also to ensure the country has adequate stock of fuel at all times.

Also, the refusal by oil companies to sell petroleum products at reduced pump prices in early August 2011, which resulted into a countrywide shortage of the precious liquid, prompted the government to revive its plan to operationalise Commercial Petroleum Company of Tanzania (COPEC).

Under the term of reference, the winner will be required to import and supply fuel to COPEC, a subsidiary of state-owned TPDC. COPEC was established in 1999 but it was granted a licence to sell fuel on wholesale in 2011 by the Energy and Water Utilities Regulatory Authority (EWURA).

The firm has five operating fuel stations countrywide which were acquired from the then BP Tanzania, now Puma Energy Tanzania.

"When TPDC issued the tender, regulations for strategic reserve were not in place and still not in place at present and did (TPDC) not receive any budgetary allocation to purchase oil for SPR," according to industry sources.

In his reaction, the Director General of TPDC, Mr Yona Kilagane, said the corporation had extended the deadline for awarding the tender and no firm has been awarded the tender yet.

"We are still communicating with respective stakeholders including the government and oil marketing companies and the tender is yet to be awarded," the TPDC boss told this paper in a telephone interview yesterday.

According to Mr Kilagane, the bidding companies have also been notified on the extension of deadline pending thorough assessment of the bids.

In an interview with 'Daily News' in the year 2012, Mr Kilagane said his corporation had engaged the government on its plans to venture into petroleum business through its subsidiary, COPEC.

"There are number of options we are considering before venturing into the business fully-fledged. Such options are under discussion at this moment," Mr Kilagane said then.

The TPDC boss also refuted claims that the company lacked financial muscle to engage in business, saying the government had pledged to avail it with funds.

COPEC had in September 2011, floated a tender for importation of 35,000 tonnes of petroleum products but none of the seven companies that had submitted bids qualified for the deal. Six foreign companies and a Tanzania firm had submitted bid for the tender.

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