GOVERNMENT will soon privatise Indeni Petroleum Refinery, a move that may put an end to the country’s importation of crude oil.
And in an exclusive interview, Energy minister David Mabumba told Diggers! that the government was wasting money by involving itself in the importation of petroleum products.
Meanwhile, Finance minister Felix Mutati has back-pedaled on his statement to Parliament that by March 1, 2017, the government would officially surrender the procurement function of finished petroleum products to the private sector.
In his 2017 national budget speech Mutati announced that government would pull out of the petroleum sub-sector because its involvement was unsustainable.
He added that the government was examining the viability of Indeni Petroleum Refinery and TAZAMA.
“Mr Speaker, the petroleum sub-sector is also embedded with inefficiencies and unsustainable Government involvement. In order to ensure efficiency and disengage Government from the sector, the procurement of finished petroleum products will with effect from 1st March, 2017 be undertaken by the private sector,” said Mutati.
“Government’s role will be limited to regulation. In the meantime, Government is examining the viability of Indeni and TAZAMA pipeline. Regarding pricing, the Government will adjust prices in line with changes in market conditions.”
When contacted this morning, Mutati said the March 1st deadline was not feasible and the status quo would remain the same until June 2017.
“My colleagues at the Ministry of Energy have been working hard on it. This week he (Mabumba) is going to announce the guideline on the procurement and it will start on the first of June,” Mutati said.
He said the process had delayed because the consultation process took longer.
“It’s done, they are finished. In fact, they went.., that’s why we couldn’t implement it in March because they needed to go to every province and since they have finished now and sorted out all the consultations they reported back to me and asked if we could shift the goal post to first of June. So I said ‘if you are doing a proper job let me know. We will do it that way,” he said.
Mutati however declined to confirm the planned privatisation of Indeni and Tazama.
“Let’s talk about that when we meet, I think that will be better,” said Mutati.
And when asked to explain why government was hesitant to announce successful bids for fuel procurement, Mabumba said the evaluation of tenders was done but had been put on hold.
He said the ministry would only announce the successful bidder in June when the new modality involving the private sector would be implemented.
“One of the key strategic or policy shifts the ministry is going to be going through is the issue of allowing the private sector a gradual process to start financing of the procurement of petroleum products. At the moment what is happening is that the Ministry of Finance have to look for money to finance the procurement of fuel products. That money can be invested in other productive areas, we are wasting that money. Because the private sector once you create an enabling environment for them, they will be able to bring private financing and buy fuel on behalf of the government,” Mabumba explained.
He said government had enough stock to last until June.
“Our projection is that the volumes that are remaining should be coming to an end in the month of June 2017. We are not going to engage in new contracts until the new modality begins,” said Mabumba.
“The evaluation of bids was done and it was concluded but it is on hold. We are allowing the private sector to come on board and the thing that the government has to do is to consult people.”
Sources at the Ministry of Energy say the delay in implementing the new modality was because government intended to sell Indeni and Tazama.
“Government is in the process of privatizing Indeni and TAZAMA, that is what the Minister of Finance meant when he said ‘we will assess the viability of Indeni and TAZAMA. Government is no longer interested in importing crude oil,” the sources explained.
“So there are deliberate decisions being made to slow down the pumping of crude between TAZAMA and Indeni. That is why there is a sharp interest in importing finished products now because importers have advised government that if TAZAMA and Indeni are operating at full capacity, there would be less need for processed petroleum products which are more lucrative to them.”
The sources further disclosed that government intends to contract one company to import processed fuel for distribution to all other Oil Marketing Companies, a move that has sparked bitterness among the OMCs
“Government plans to contract one company to import processed fuel and distribute it to others. This has caused a lot of confusion in the process. There are so many hands trying to influence these decisions and to eat,” said the sources.