According to reports in the Government's possession, consumption of petroleum products will exceed 4 million m3 per year by 2030. At present, the Government-owned Refinery (INDENI) is in need of investment to firstly increase its throughput capacity and also to be able to meet cleaner fuels requirements for diesel (at present the sulphur content for diesel produced by INDENI Refinery is 5000 ppm against an African Refiners Association (AFRA) agreed target of 50 ppm). To support this increase there will also be a need to increase the throughput of the TAZAMA pipeline. This will involve the construction of additional tanks in Kigamboni and the replacement of the 934 km of 8" line with 12" line. What struck me about these presentations is that we have been planning these expansions for the last ten years but nothing has physically happened. Instead, the cost of completing these projects has steadily risen in the face of our inaction. The market share for Refinery products has fallen to around 40% of the national requirement while the remaining 60% is imported as finished products. TAZAMA is proposing a new products pipeline be built alongside the existing one as well as the construction of storage tanks for petroleum products in Dar-es-Salaam at a cost of $1.5 billion. In all, the expected investment in petroleum infrastructure will exceed 2.3 billion dollars. When we couple these investments with the fact that they will have to be financed through debt, the cost to the consumer will be very high and any investor will be expecting a return on their investment.
It was interesting to note that one of the banks made a presentation. They were categorical in stating their view that profitable refineries must have a throughput of at least 200,000 barrels per day (around 10 million tonnes per annum). They were however very keen to support storage tanks and pipelines. We have been fighting to save the Refinery for at least the last 15 years but it should be noted that we have failed to lock down a strategic partner after all this time. Due to the large investment expected, the Refinery would have to be supported for at least 20 years which takes us to 2040. Is it reasonable to expect that the world will continue to use fossil fuels for all the period?
Perhaps the time has come for a bold decision taking us in a new direction. By this I mean, it may be better to direct our resources into projects that can receive support in our current environment. Transport can be fueled by the following options:
- Liquefied Petroleum Gas or Natural gas
- Biofuels
- Electricity
To successfully roll out the use of any of the above will require the development of new infrastructure.
LPG or LNG
In our national context, either one of these fuels will only be viable if we identify our own local source or undertake to construct a pipeline from Mozambique. Capacity will need to be developed to pipe the gas all over the country or to establish satellite operations that can support the consumption of gas in their vicinity. Those countries that have adopted this technology have catalysed consumption by converting buses used in cities to run on gas. It will require a full commitment from the Government to implement and may be too challenging for us in terms of the human and the financial resources required to achieve it.
Biofuels
Discussions around biofuels have continued but there have been lukewarm efforts to really make sure it is a significant part of our national fuel mix. Blending of up to 10% of either biodiesel or ethanol into existing cars can be implemented immediately. We still have not developed sufficient capacity in biofuel production to meet national demand. It will also require the establishment of blending facilities around the country. The existing petroleum infrastructure can be leveraged to assist in this endeavour. There is a chicken and egg scenario here and we may need to make interventions to ensure clear progress is made. a good start would be the advertisement of a contract to supply biofuels to the national market over a two year period. The contractor would have an obligation to ensure that there is local production and also to ensure standards are maintained. The Biofuels Association presented a paper and they have been saying the same thing for over 10 years. Isn't there a way to move things forward?
Electricity
The electric car is fast approaching a tipping point. They can no longer be ignored. We also must take on board the sentiments of vehicle manufacturers. Volvo has already announced that they will stop making diesel vehicles from this year. Other manufacturers have started announcing similar plans. These means that the assumptions outlined above regarding the future consumption of fuels may need to be revised simply because the diesel engine is on borrowed time. The greatest challenge for this technology is the availability of a network of charging stations to recharge batteries. In Europe, governments have actively built charging stations or given incentives to suppliers to make them available. On average, an electric car will be able to drive around 400 km (Lusaka - Ndola) on a single charge. I would envisage that in Zambia to start out with, the first adopters would need to have a charging station at home. The government could accelerate adoption by putting in place charging stations at Government buildings for Government vehicles. It would also mean that we have to address our load management issues as soon as possible. Charging stations for home use would cost around USD1,000. Commercial fast charging equipment would, however, cost much more than this.
Conclusion
There is a demand for energy for transport and this demand is growing. Of the three above, I would recommend that we adopt a combination of biofuels and electricity as the way forward. The government should undertake a study to establish some baseline data. It is my hope that when the Oil and Gas Week is held next year, there will be policy guidance available regarding the inclusion of electricity into the national fuel mix.
