Zimbabwe: Govt Blocks US$1bn Pipeline Project

Mar 24, 2019

The Ministry of Energy has blocked a plan by South African-owned Mining, Oil and Gas Services Company (MOGS) to construct a US$1 billion 550-kilometre fuel pipeline from Beira to Harare, arguing that the sector is oversubscribed and has no space for new players, an official has confirmed.

Zimbabwe's fuel sector, often described as opaque, is dominated by Sakunda Holdings which is owned by businessman Kudakwashe Tagwirei. The company also has interests in Puma, which is owned by Glencore and Trafigura

According to government sources, MOGS' bid to build a second fuel pipeline collapsed at a meeting held in December last year where the Ministry of Energy reportedly proposed a new fuel pipeline from Namibia to service the southern parts of the country.

Tagwirei, whose company controls the Beira to Harare pipeline that supplies Zimbabwe with most of its fuel, is allegedly blocking the construction of the second pipeline that is earmarked to go as far as Botswana.

Sakunda recently invested US$11 million into the refurbishment of the Beira-Feruka oil pipeline, and is jointly running the pipeline with the National Oil Infrastructure Company (Noic) as it recoups its investment.

Sakunda has enjoyed a monopoly over the pipeline, a move that has drawn the ire of other players.

MOGS, which has the backing of President Emmerson Mnangagwa's advisor Chris Mutsvangwa, has been pushing for a deal to build a second pipeline but some politicians have been reportedly blocking it.

Mutsvangwa, who has been vocal about dismantling Sakunda's monopoly in the fuel sector, approached Mnangagwa with a proposal to have MOGS build a second pipeline. The presidential adviser has been actively promoting the MOGS deal alongside former MDC legislator Eddie Cross.

In the meeting held in December, MOGS representatives were told that Zimbabwe was already getting sufficient fuel supplies through the existing pipeline, therefore there was no need to build another pipeline.

Speaking to the Zimbabwe Independent, the permanent secretary in the Ministry of Energy, Gloria Magombo, expressed government's reluctance to allow a new player into the fuel sector.

"So far, government is satisfied with the manner that Noic has operated the pipelines. There are no plans to bring other players to run the existing pipeline other than Noic," said Magombo.

While government argues that the pipeline is run by Noic, Sakunda has enjoyed a monopoly over the strategic facility.

Magombo was unavailable for further comment on Sakunda's monopoly over the pipeline although she had promised to respond. Energy Minister Joram Gumbo's phone was being answered by his aide who said he was busy. The MOGS deal was initially tabled in 2009, but failed to take off due to resistance from former president Robert Mugabe.

Tagwirei was also in partnership with Mugabe's son-in-law Simba Chikore in the controversial Dema Power Plant project which was producing electricity through diesel-powered generators for sale to Zesa at exorbitant prices in 2017. Zesa was making advance payment for the electricity.

MOGS proposed to construct a pipeline with capacity to move 500 million litres of fuel in the country compared to the 110 million litres supplied through the Sakunda-controlled facility.

MOGS was also promising Zimbabwe six months' steady supply of fuel and to provide government with foreign currency to assist in stabilising the economy.

Magombo said government had received numerous unsolicited proposals from potential investors in the energy sector.

"Besides MOGS, government received numerous unsolicited proposals from other investors who also wanted to invest in the fuel infrastructure. In all the instances, discussions are held in confidence and neither party can disclose such discussions without the express authority of the other," said Magombo.

Presidential spokesperson George Charamba last year said there were no laws impeding new players from venturing into the fuel sector, saying the only way to stop Sakunda's monopoly was to get a new player.

The pipeline from Beira to Mutare is owned by a Mozambican company, Companhia do Pipeline Mozambique (CPMZ), while Zimbabwe pays for the use of the pipeline up to Feruka.

The second part of the pipeline, which runs from Feruka to Harare, is owned by the Petrozim Line (Pvt) Ltd (PZL), a company 100% owned by the government.

Zimbabwe has endured crippling fuel shortages which are likely to be worsened by the devastating Cyclone Idai which has reportedly destroyed port facilities and fuel pump infrastructure in Beira.

 

Source: Zimbabwe Independent

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