Friday, May 24, 2024

Fuel retail industry not out of the woods yet

Botswana’s oil industry has been having a moment of its own. For a few weeks, all of the industry’s employees – from a cleaner at the fuel station to a chief Executive Officer at the oil multinationals country head office were treated like kings, feted because they were selling the most prized commodity in the country.

This was on the back of fuel shortages that the country experienced as restrictions from the first wave of lockdowns were being eased.

While whole country was struggling to stage a comeback, the oil industry found itself unable to meet demands placed on it. It was a few weeks of chaos.

It is not yet clear whether the fuel shortages caught government by surprise or they were foreseen but ignored.

Either way they caused an economic disruption that will itself take time to correct.

In the last few weeks since restrictions were imposed by government the volatility has cooled off and supply has somewhat stabilised.

Permanent Secretary in the ministry responsible for energy, Mmetla Masire has even hinted at the possibility of government reviewing the restrictions, with a view to lifting them.

He said overall supply has improved. But still fuel stations in Botswana continue to operate under strict time schedules given by government. Petrol is sold under the rationing guidelines of a maximum of P250 per car. And Jerry cans can only be filled on Thursdays.

Masire also said government was working at replenishing its dwindled strategic reserves. Due to the current shortages alternative routes have been introduced primarily Namibia and Mozambique.

Overall Capacity has in the meantime improved, thanks to interventions by Government that effectively targeted hoarding and also panic buying. Crucially the latest two week-lockdown has  also given the retailers timed to replenish their reserves almost unimpeded. But with the economy opening up, new challenges might emerge. Sunday Standard has talked to the Oil Industry Association, chaired by Mahube Mpugwa, the head of Puma Energy, Botswana.

The industry observes that they would need to increase supply by up to 20 percent above normal for a period of at least 4 weeks for all companies in order for a normal situation to be restored noting that our monthly consumption is 100 million litres. These companies include Astron Energy (Proprietary) Limited, Engen Marketing Botswana Limited, Kwa Nokeng Oil, Puma Energy Botswana (Proprietary) Limited, Vivo Energy Botswana Limited; and Total Botswana (Proprietary) Limited.

The view of the Association is that no one factor is responsible for recent fuel shortages that shocked the nation.

Rather, the shortages have been a result of several factors that connived.

The Oil Industry Association holds that as net importer of petroleum products making it wholly reliant on fuel imported from neighbouring countries, predominantly South Africa.

And according to them a “majority of the fuel destined for Botswana is carried through the National Multi Product Pipeline (NMPP) to the various depots including Tarlton, Langlaagte and Watloo.”

Covid-19 has however been singled out as a major disrupter of supply chain and thus cause for the shortages.

As it were there have been COVID-19 related unplanned shut-downs, pressure on supply and delays at ports of entry.

Consequently, given the worldwide COVID-19 crisis and resulting lockdowns in most countries, there has been pressure on stocks particularly from main supply hubs chiefly South Africa.

When the lockdown restrictions were eased and the economy opened there resulted in a more rapid recovery than was expected.

“Therefore there has been a dramatic increase in demand which is currently exceeding supply.

There is also added pressure at ports of entry, due to the critical COVID-19 protocols and tests that need to be conducted, resulting in up to 4 days delay in some instances,” says the Spokesperson of the Oil Industry.

Incidents of vandalism have been reported. As have ben incidents of sporadic Truck Driver Industrial action. According to Botswana’s oil Industry association, the National Multi-product Pipeline (NMPP) transports diesel, gasoline and jet fuel from Durban to Gauteng. The NMPP performs an essential service of transporting petroleum products from the coast to the inland market over a period of between 14 days. This inland market includes various depots connected to the NMPP.

“The South African Petroleum Industry Association has noted that several theft and vandalism occurrences have been reported since April 2020 and these occurrences have had a severe impact on fuel supply. The theft and tampering of the NMPP has resulted in reduced stock levels for all depots reliant on the pipeline supply including Tarlton, a primary source for Botswana.”

Additionally, says the industry, there have been reports of industrial action by truck drivers this past week, presenting another constraint to the movement of fuel into Botswana.

Domestic, interstate and international travels have proven to be some of the main ways the COVID-19 virus is spreading among communities, nations and globally.  Compliance with Covid-19 protocols at the ports of entry is crucial and it takes time.

    According to the industry there is a need therefore to limit travelling and freight movements resulting in various necessary Covid-19 protocols being adopted at all ports of entry. “The main challenges to date are the turnaround times for tests. This has in some instances resulted in 3-4 day delays at borders. Additionally, due to the Covid-19 protocols, driver quarantining is necessary and this has affected the capacity of the transporters as on some days certain transporters have advised that they are operating at 60% capacity.”

But what is the current state of the supply chain?

“The supply chain remains under strain due to a cocktail of challenges which include refinery outages, vandalism on the pipeline referred to earlier and threats on movement of trucks and these have contributed to fuel shortages in Botswana.”

The industry says it remains in constant communication with the Government of Botswana.

And while supply has plummeted, the industry has observed nothing untoward about consumption, which has stayed within the expected parametres.

Notwithstanding the recent challenges, there is still no agreement from the side of the industry for Botswana Oil to become the sole purchaser of fuel into the country.]

This, says the industry is mainly on account of risk management.

“Botswana’s geographic location as a landlocked country necessitates reliance on neighbouring countries with coastal access for fuel supply. Under the current system OMC’s procure fuel from a multiplicity of sources including Enref, Sapref, Natref Tarlton, Langlaagt, Waltloo, Klerksdorp, Mozambique and Namibia depending on product availability. This helps to manage risk and ensure some fuel comes into Botswana even when some suppliers are severely constrained. If there was only one source, be it BOL or a single multinational the situation would have been much worse. A sole importer consequently assumes sole risk and should this sole importer experience any challenges in satisfying the national supply requirements, the country will immediately be negatively impacted as the risk is not spread,” they say.

They however say Botswana oil could increase its inventory holding of strategic reserves to effectively support situations such as the one we are currently facing.

On how long the current market uncertainty is expected to last, the industry says it is difficult to say because it would depend on the continued uninterrupted operation of the refineries in SA and the continued uninterrupted operation of the NMPP.

“Once the supply challenges are addressed there will be need to increase the rate of transportation of product into Botswana so the possible delays at the borders can be offset.”

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