Today Indeni Oil Refinery has been placed on Care and Maintenance.
What is the meaning of Care and Maintenance?
“Care and maintenance is a term used in the mining industry to describe processes and conditions on a closed mine site where there is potential to recommence operations at a later date. During a care and maintenance phase, production is stopped but the site is managed to ensure it remains in a safe and stable condition”,(https://en.m.wikipedia.org)
On Thursday 16 December 2021, the nation was greeted with the news that the fuel prices had been increased “effective midnight tonight”.
Has the placing of Indeni Petroleum Refinery on Care and Maintenance have anything to do with the increase in the price of fuel?
When you consider the chronology of events, it would be a logical conclusion that the prices of fuel may have gone up because operations at the Refinery have been halted.
But, is this the case?
The month of November 2021 closed with a major event, which sent some “shock waves” in people. The event was the announcement by the Minister of Energy that Indeni Petroleum Refinery had been placed under Care and Maintenance.
Here is an extract from the Minister’s statement:
“The Government intends to implement under transportation the pumping of Low Sulphur Gasoil (LSG-Diesel) through the TAZAMA Pipelines as one of the reforms. Equally, products such as Petrol, Jet A1, Liquefied Petroleum Gas (LPG), Kerosene and Heavy Fuel Oil (HFO) will be transported via road as they will no longer be produced by the Refinery.”(Hon. Peter Chibwe Kapala, MP, Minister, Ministry of Energy).
What is the meaning of this statement by the Minister of Energy?
What the Minister said was that Indeni Petroleum Refinery would no longer produce some fuel products that it used to produce. He said that those fuel products that Indeni Petroleum Refinery had stopped producing would be coming into the country by road.
From where would these fuel products be coming by road?
In the statement, the Minister did not say from where these fuel products would be coming into the country by road.
What prompted the decision to place the Refinery on Care and Maintenance?
The Minister’s statement stated as follows:
“I wish to inform the general public that the New Dawn Government led by His Excellency Mr. Hakainde Hichilema has begun the process of reforming the petroleum subsector. … As you may be aware, the sector has been marred with a lot of inefficiencies, which have increased the cost of the various petroleum products. The reforms are aimed at ensuring that there is adequate, reliable and affordable supply of petroleum products in the country”, (ibid.)
Ok. It looks like so far so good!
But what are the implications of placing the Refinery on Care and Maintenance?
The Minister pointed out the implications in the same statement:
“The public must note that we have decided to put INDENI Petroleum Refinery on Care and Maintenance which will result in having fewer employees working at INDENI while the other employees will be reassigned to manage fuel storage depots, Further, an option of voluntary separation will be given to employees.”(ibid.)
Oh, no! It looks like some people may lose jobs; it may just be a matter of time. If this be the case, then too bad.
Is there no alternative solution to Indeni, to avoid people losing jobs?
“In 2017, the World Bank stated that the Indeni Petroleum Refinery was ‘inefficient and technologically unsuited for current fuel needs’. Its capacity is too small. It does not produce refinement products that larger, more efficient refineries can. For the amount of resources expended to keep it running, the government can do better towards meeting their national petroleum objectives. In order to meet increasing petroleum products demand both nationally and regionally, there are two choices (a) build a new modern refinery that meets current and future national and regional needs or (b) expand and modernize the present refinery to improve its efficiency and output. Building a new refinery is ruled out by its cost. … The last hope is to find a deep-pocket investor who can buy a stake in the present refinery and modernize it.” (https://en.m.wikipedia.org)
Does this not mean that talks about the fate of Indeni Petroleum Refinery have not started with the New Dawn Government?
Yes, this is what it means. While this World Bank observation was made in 2017, there had been some other talks long before then. For example on 10 July 2013, ZANIS reported as follows:
“The Private Sector Development Association (PSDA) says it backs government’s decision to sell 49 percent shares of Indeni Oil Refinery in Ndola. Association Chairperson Yusuf Dodia says the move by government to sell the 49 percent shares in the Oil refinery to a private investor will help stabilize fuel prices in the country. … ‘The decision was a positive move as it will allow for an opportunity for more capital investment into the company and bring consistency in the operation of the company,’ he said.”
On 25 July 2013the Economic Intelligence Unit (EIU) published as follows:
“An equity partner will be sought to take a 49 percentage stake in the Indeni Oil Refinery, where the government also wants to build additional capacity at a projected cost of US$410m.The cabinet’s approval of a plan to sell a stake in the country’s sole petroleum refinery underlines an acceptance in government of the need to expand refining capacity and secure strategic national fuel reserves. It is also a step towards sharing the technical and financial burden of operating the loss making facility, after Total, a French oil major, divested its 50 percent shareholding over two years ago.”
When therefore did talks about the sale of Indeni Petroleum Refinery start?
At inception of the Refinery in 1973, the Government of the Republic of Zambia and an Italian energy company called Eni (through Agip, its subsidiary) were shareholders of a company called Indeni Petroleum Refinery Company Limited. The shareholding was 50% each. And according to the terms of engagement the management of the refinery was the responsibility of Eni.
But in this equation of placing Indeni under Care and Maintenance, there is no mention of the company, Eni, whose responsibility was the management of the Refinery. Why?
Eni is not in the equation because in 2001, Total, through its subsidiary TotalFinaElf, bought Eni’s shares, and took over the management of the refinery.
But, then, why is Total not part of this decision to place Indeni under Care and Maintenance?
It is because Total sold its shareholding to the Zambian government in 2009. This meant that after buying the shareholding of Total the Zambian government took over the management of the Refinery.
Wait a minute, does this mean that, what started as a shareholding company in 1973, came under the sole ownership of the Zambian Government from 2009 to date, when it has now been placed on Care and Maintenance?
Oh! No. This does not look good.
On 20 October 2009, Reuters reported as follows:
“French oil giant, Total (TOTF.PA) plans to sell its 50 percent shareholding in Zambia’s sole oil refinery to the Zambian government by the end of this year, a senior government official said on Tuesday. Zambia’s sole 24,000 barrel-per-day Indeni Petroleum Refinery has suffered sudden breakdowns of the old machinery at the 36-year-old plant. Owing to a collapse of a key refinery component at Indeni, Zambia has been experiencing acute fuel shortage in the last two weeks, threatening to halt the economic wheels of Africa’s largest copper producer. … latest market estimates indicate that the refinery needs $65 million for recapitalization. Total last year told Zambia government its intentions to sell to another company but authorities in the Southern African country objected and opted to fully own the refinery.”
What therefore can we conclude about what has happened to Indeni today, and where it is going?
Although the placing of Indeni on Care and Maintenance and the increase in the prices of fuels have occurred within a space of one month, the fate of Indenicould be contexualised differently. There are still some hanging questions regarding what next for Indeni, after the Care and Maintenance.
(If you have any socio-political question that you would like to be discussed on this column, kindly send a message to me either through sms, WhatsApp or email).
SIMON KALOLOKABANDA
Whatsapp: +260-761-206353
Email: [email protected]
21 December2021
