Govt loosens foreigners’ grip on fuel importation

Thursday September 22 2016
pic govt loosen

Bank of Africa public relations manager Abdulrahim Msonde speaks during the Petroleum Bulk Procurement Agency (PBPA) meeting in Dar es Salaam yesterday. PHOTO | SALIM SHAO

Dar es Salaam. The government has directed that as of January next year, only locally registered oil marketing companies will be allowed to bid for the importation of petroleum products in the country.

The Petroleum Bulk Procurement Agency (PBPA) acting executive director, Mr Michael Mjinja, said the agency has reviewed the bulk oil import rules to allow participation of more local players.

The new rules aim at breaking dominance of the multi-billion shillings business by at least four companies that had deployed their muscle to elbow out smaller competitors.

Mr Mjinja said it will now be mandatory for all the foreign oil companies to register first and maintain their presence locally to qualify for the tenders.

The bulk oil import business has been dominated by companies such as Sahara Group of Nigeria and Augusta Energy of South Africa. Oryx Tanzania Limited, Gapco (K) Limited and ENOC Africa, a Tanzanian registered new entrant have also participated to a smaller scale.

Sahara Group Head of corporate communications Bethel Obioma told The Citizen on phone that the decision won’t affect the company as they are already registered locally as Sahara Tanzania Limited.

Advertisement

According to him, the decision to tender for specific products and to allow smaller vessels rather than consolidated volumes was not a bad thing as long as it will be in the best interest of the country because, at the end of the day, it is all about the country’s interests.

The government has in the past touted the idea of starting a new state-owned oil import company as the country eyes being a major player in the gas and oil business. The state-owned company would be run jointly by TPDC and private investors even though the idea is yet to take off.

Mr Mjinja was speaking yesterday in Dar es Salaam during a consultative meeting with bankers who are key players in the oil import chain.

The meeting was meant to expound to the banks on the new system which would be the first major review of the regime since the country introduced the bulk oil imports.

According to Mr Mjinja, from January, companies will be allowed to tender for single products rather than the whole range of oil products in one swoop.

The imports would also be broken into smaller monthly units as opposed to the current arrangement in which the company that wins the tender ships in quantities enough to cover a minimum of three months.

The old bulk system was seen as disadvantaging low capacity oil companies that did not raise the requisite premiums to cover the costs for imports, insurance cover and other related shipping costs.

The smaller players who were locked out of the quarterly tenders will now be able to compete for lower quantities to be shipped in monthly. They will also bid to bring in separate quantities and products.

“The new system will be different to the existing practice where tenders are floated to meet quarterly requirements,” he said, reiterating that since 2012 when the bulk procurement started, local firms have been locked out as it was expensive for them to import as stipulated.

“This procedure didn’t attract many competitors and despite expecting at least 36 companies to participate in the bidding process, only 4 to 6 companies were participating in the procedure because the process was very expensive,” he said.

Mjinja further noted that the new system would also allow the government to earn tax as required. He said foreign registered firms often exploited loopholes to avoid taxes.

The government introduced the bulk procurement system (BPS) in January 2012, establishing a database on consumption trends in a bid to get the best price on the world market and guarantee.

Furthermore, it came into practice to help control the import bill, reduce retail prices and fight off oil cartels and smuggling.

Mr Mjinja named the the products imported in the BPS including diesel, petrol and Jet AI. Tanzania consumes about 1.54 million cubic metres per annum of petroleum products.

Explaining the new import regime, he said that two vessels of diesel will be imported at 80,000 metric tonnes to 100,000 metric tonnes while 3 to 4 vessels of petrol will be also expected to bring in between 36,000 and 38,000 metric tonnes, while one vessel of Jet fuel will import between 23,000 and 28,000 metric tonnes.

He said the new system will see demurrage cost decrease from $45-$50 per metric ton. to $1-$2 per metric tonne. The companies will, however, be required to submit bid bonds of between $100,000 and $200,000.