Mozambican fuel deal clears red tape

MBONGENI MGUNI
Staff Writer | Tuesday July 13, 2010 00:00

Senior officials at the Department of Energy Affairs (DEA) say the existing fuel price slate or formula used was based on supplies from Durban to Gaborone. The same slate, which includes transport costs, dealer and industry margins, is also used for the minimal supplies Botswana receives from Namibia.

With the drive to diversify fuel sources and routes, Engen Botswana expects to pioneer supplies from Matola, a major Mozambican coastal city with established fuel lines.

'We need to re-formulate and come up with a slate that will take care of the route from Matola,' says a DEA official. 'While the product from Mozambique will be the same as the one from Durban, the main difference will be in transport costs.

'In the current slate, for pricing purposes, we use the averages of three import areas, namely, the Gulf, Singapore and the Mediterranean. With Matola, we don't know where that fuel will be sourced from and its price could be higher or lower than the values on the current slate.'

The source of Matola fuel will influence other pump price factors such as insurance against loss at sea and storage. Added to the transport component of the slate, local motorists fear that diversifying fuel routes and sources could result in frequent upward reviews of fuel prices.

However, the Energy Affairs official emphasises that fuel, as an administered price, will continue being regulated by Government at least cost to motorists.

'We will continue to regulate the prices,' he says. The major issue is to incorporate the differences in Mozambique supplies to the slate being used for Durban supplies. That's a study that's presently underway and is scheduled for conclusion soon.'

Other DEA sources are suggesting that Government could adjust certain levies within the slate to accommodate higher prices of fuel from Mozambique.

It could raise the percentage allocated to the National Petroleum Fund, the mechanism through which it subsidises fuel prices in Botswana and from which it purchases its own fuel supplies, maintains and operates its strategic fuel storage facilities.

It is expected that a route to Matola will open up for local petroleum retailers 'within weeks' as soon as Government has ironed out various administrative challenges and seals inter-governmental support from Mozambique and Zimbabwe.

Retailers are not expected to immediately utilise Mozambique for fuel because South Africa remains the cheaper option. However, Mozambican fuel will become critical should supplies from South Africa be disrupted.