BOL declares readiness to take over fuel imports
Mbongeni Mguni | Monday April 1, 2024 10:13
From April 1, BOL will import 90% of the country’s fuel imports and on-sell this to the existing multinational oil companies that are operating in the country and have previously imported for themselves. Citizen companies will have the right to import the outstanding 10%.
Last October, through a Statutory Instrument, BOL secured the 90% import quota, which officials say will ensure security and stability of supply, provide leverage to negotiate better prices and terms as well as empower citizen entrepreneurs in an industry dominated by large, foreign multinationals.
“We are definitely going to meet a lot of challenges and we should not despair on this,” Baruti Regoeng, Department of Energy chief energy engineer told a briefing on Tuesday. “To start up such an exercise will require a lot of support, all types of support. “There are a lot of risks involved and a bit of disturbance in the system but this should not curtail us from the goal we are trying to achieve.”
BOL officials said extensive consultations had been undertaken with the multinational oil marketing companies currently operating in the country, as well as other key stakeholders. Multinational firms, which include players such as Engen, Total, Puma, and Caltex, as well as the broader industry were reportedly taken aback by the BOL’s import quota, expressing concerns about the state oil company’s capacity, particularly to carry the cost of about 100 million litres monthly on its balance sheet in an industry known for sharp price fluctuations.
BOL’s general manager supply, Onkutule Masima, said the company has developed an implementation and readiness plan, which caters for the transitional period between April and October before longer-term arrangements take over.
The plan includes diversifying fuel supply sources and routes through the engagement of ten suppliers in South Africa, Namibia, and Mozambique. BOL is preparing to float tenders in the market for longer-term supply contracts later this year.
“These are not new suppliers, but suppliers that we have been using albeit at smaller volumes but now we are getting a bit more to feed the market,” he told BusinessWeek on the sidelines of the briefing. “We will be looking at longer-term contracts and we are going back to market. “The Request for Proposals is going through various structures and it will be floated probably in April to be closed maybe July/September because there might be some long lead items.”
He explained that the longer-term contracts would generally be for a minimum of 12 months but where BOL sees real value that is priced in such a way that it moves with the market and does not expose the company to adverse market conditions, the contracts can be longer.
The general manager said in terms of distribution, BOL had engaged with multinational firms and agreed on four models to be used to move the imported supplies into the local market.
“BOL will be importing and as an importer, the people that we are serving on the ground are the international oil marketing companies. “They have various facilities around the country, their own depots, retail sites and others. “The distribution model that we have agreed with them and want to stick to and implement, is the one that respects the efficiencies that have developed in the business. “The easiest and most basic way is to say the 'product will be at our depot, come and fetch it,’ but there will be double handling and all those other things,” Masima said.
He continued: “So we are now saying when the product comes imported by BOL from a depot outside the country, it goes through the border then we will have a process at a set location whether at our depot for some of them, or their stations where they dope their product. “We will meet there and hand over the product to them, not meeting physically, but through systems. “The transporter from that point on will transport for the oil marketing companies and we would have delivered the product. “That’s the model that we don’t want to trample on because it’s an efficiency that has been built up in the industry.”
The other distribution models involve BOL delivering the supplies to the oil companies’ depots. Masima explained that because many of the companies have arrangements with their peers to share infrastructure, this particular model would account for 60% of the product movement. The companies can also fetch supplies from BOL’s depots or where they have pipelines near BOL infrastructure, connect to these.
BOL CEO, Meshack Tshekedi said the state oil company was focused on the security and stability of fuel supply as well as citizen empowerment in the ecosystem of opportunities that are opening up due to BOL taking over fuel imports.
These opportunities include areas such as transport, commercial, retail, engineering, maintenance and service as well as customs and clearing.
“For example, in transportation, a few years ago, we had just nine trucks run by citizens, and now we have 81,” he said. “We are expecting to get to 125 after April when we start with the import quota, then move to 200 going forward.”
BOL’s overall local spending has grown from about 40% in 2019 to the current 97% while the citizen procurement over that period has risen from 33% to 62% now, including transport.