By Technical Analyst
Zambia has a growing industry that will continue to rely on usage of fossil fuels, particularly diesel and petrol in the foreseeable future. The ambitious government vision to double copper mining output within a decade could be threatened by an energy deficit, particularly electricity and diesel. The petroleum production complex, comprising, Tazama pipelines and Indeni Petroleum Refinery has served the country for the past 50 years. The economy has grown, and will continue to grow, to levels where demand can no longer be met by supply from the Indeni. The biggest problem of the refinery is inadequate production capacity.
The other equally-important problems are high unit costs of production that lead to higher pump prices and consequently raising of the cost of doing business. Failure by Indeni to produce fuels, especially low sulphur diesel, that does not meet SADC regional standards and international benchmarks is a major concern. Refinery losses are far too high and also a worring problem.
Proposals have been made and costed for possible expansion of Indeni at USD500 million and/or modernizing it, by retrofitting accessories for producing low sulphur fuel at a cost of USD250 million. Both projects would benefit Indeni greatly, but would not help Zambia much. Put simply, Indeni is a toy refinery with obsolete technology that is inefficient and produces poor quality products of yesterday that don’t meet the needs of today and tomorrow. It is part of the problem, not part of the solution to Zambia’s looming fuel crisis. It should be shut or converted into a storage and handling facility to support Tazama Pipelines Limited, which should revert to its 1968 model to be a cheaper, reliable and high-capacity transporter of finished products.
The Tazama solution will guarantee cheaper pump prices for finished products, higher supply capacity of key fuels, particularly diesel and petrol; and a sustainable supply of products that meet and exceed SADC and international quality standards for clean fuel, particularly low sulphur diesel. This category of fuel is important to support the modern automotive and mining industry that use high efficiency engines that demand better performance and lower emissions. Going forward, government should start to think outside the box to respond to studies indicating that the current Tazama and Indeni arrangement will fall below demand by up to 80% by 2040. The industry is already approaching breaking point: majority of fuel required for mining and transportation is imported at great cost and using a mode of transport – road tankers – that are causing congestion and damage to roads.
This article explains the problems, proposes the solution and gives details and justification on why shutting Indeni Petroleum Refinery Limited, while reverting Tazama Pipelines is the most logical, most urgent, and most inevitable solution on the table that government can ignore at the peril of important development plans, including expanding mining.
Click the link below
