Govt eyeing BP, Shell for state oil company?

MBONGENI MGUNI
Staff Writer | Friday July 9, 2010 00:00

 

Both BP and Shell recently announced their intentions to exit the Botswana market, with the former citing a strategic review and the latter a shift to exploration and production as opposed to refinery and marketing.

Shell and BP are Botswana's two biggest and oldest petroleum retailers with extensive infrastructure countrywide and lucrative contracts across industry, many of these with government departments. Together, the two titans have 75 retail sites across the country. Other players in the market are Engen Botswana, Total and Caltex.

This week, petroleum industry insiders said the Government of Botswana would emulate initiatives underway in some of the other countries BP and Shell are pulling out of. In Africa, besides Botswana, BP is exiting Namibia, Malawi, Tanzania and Zambia while Shell is pulling out of 21 states.

'The Botswana Government is studying the establishment of a state-owned oil company,' an insider told BusinessWeek. 'There's an opportunity for them to take over Shell or BP's assets here, depending on which offers the best value.

'That is what they are studying. That is actually good thinking by Government because multinational corporations are driven by profit, and if the government does not have its own company, this could have strategic consequences.'

The proposed state oil company, which will require an Act of Parliament, will take the form of a network of depots, storage facilities and supply routes supervised by a headquarters that is likely to be in Gaborone.

The state oil company, which will take the form of a parastatal, is expected to procure petroleum products on behalf of the government and possibly the private sector, as part of diversification of fuel sources and routes envisioned in NDP 10.

Government is expected to outsource expertise on the company's composition, mandate and other technical details related to its operations.

The Permanent Secretary at the Ministry of Minerals, Energy and Water Resources, Gabaake Gabaake, said securing BP or Shell infrastructure was 'just one of the options being looked at'.

'I cannot give any details because this (state oil company) is something that Government will adjudicate on at Cabinet level to say what direction we should take,' Gabaake said.

'Securing BP or Shell infrastructure could be one of the options to look at. We are looking at various options to make Botswana more secure in terms of the availability of petroleum products.'

The establishment of a state oil company is also critical in Government's on-going negotiations for diversified fuel routes and sources. Botswana is currently negotiating with Mozambique for fuel supplies, where they are controlled by Petromoc, a parastatal. Plans are underway for additional supplies from Namibia whose supplies are also managed by a parastatal, the National Petroleum Corporation of Namibia.

Thus, while Botswana, Namibia and Mozambique may sign inter-governmental Memorandums of Understanding, utility-to-utility agreements are presently hindered by the fact that Botswana does not have such an entity.

This has the effect of limiting Botswana's role to facilitating the technical and political environment required for local petroleum retailers to bring the supplies in.