After more than five years of procrastination, Tanzania is finally set to establish a strategic petroleum reserve to cushion the country from unpredictable international prices and supply disruptions, despite controversies over the procurement process.
Tanzania Energy and Minerals Deputy Minister George Simbachawene has revealed that plans for a National Strategic Petroleum Reserve are at a “critical” stage and that government will soon unveil the winner of a tender to import and supply petroleum products to the reserve.
Currently, the East African nation has a small reserve that can meet consumer demand for only 10 to 15 days in the event of supply disruptions.
“It is important that we establish a strategic fuel reserve to ensure the country has stocks at all times,” he says.
The announcement comes amid revelations that a procurement process by State-owned Tanzania Petroleum Development Corporation (TPDC) to select a supplier to the reserve could be cancelled owing to alleged irregularities.
Late last year, the TPDC put out a tender for 51 000 t of white petroleum products, consisting of 14 000 t of molecular science products, 30 000 t of automotive gas oil and 7 000 t of dual-purpose kerosene.
Twenty-five local and international companies, among them Independent Petroleum Group, Galawa Petroleum, Trafigura, Addax Energy Geneva, Augusta Geneva, Prevail Technologies, Vitol and Oman Trading International, bid for this lucrative deal.
Controversy has now emerged over the alleged flouting of procurement regulations, a development that could plunge the process into jeopardy.
According to Simbachawene, the establishment of a strategic reserve has become a top government priority not only to mitigate fluctuating prices on the international market but also to guard against supply disruptions and protect consumers.
“The oil shortage problem that the country continues to face can be partly attributed to the lack of a national oil reserve,” he says.
Tanzania, East Africa’s second-largest economy, has suffered severe petroleum crises since government allowed oil marketers to import product in 2000. In recent years, economic activities have been disrupted owing to recurring shortages, while domestic prices have been rising as result of hoarding by oil marketers.
The country, which consumes 350 000 t of petroleum products monthly, is banking on the strategic reserve to resolve the problems facing the petroleum sector. Though the project was conceived back in 2008, it has failed to kick off owing to a lack of funds.
If Tanzania manages to set up the strategic reserve, it will have upstaged neighbouring Kenya, which, for close to a decade, has been talking of setting up a similar facility.
Two years ago, State-owned National Oil Corporation of Kenya put out a tender for a detailed feasibility study but the process has since fizzled out.