Zimbabwe update

BP deal to supply fuel to Zimbabwe falls through

2008-08-08

http://www.pambazuka.org/en/category/zimbabwe/50070

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Negotiations between the National Oil Company of Zimbabwe (NOCZIM) and two international petroleum companies to supply fuel to the country have collapsed over pricing, sources told ZimOnline.

Negotiations between the National Oil Company of Zimbabwe (NOCZIM) and two international petroleum companies to supply fuel to the country have collapsed over pricing, sources told ZimOnline.

Sources in the oil industry said NOCZIM was about to clinch a fuel deal with Independent Petroleum Group of Kuwait and BP Shell of South Africa, but it fell through after NOCZIM insisted that the landing rate be US$0,60 a litre.

“Negotiations collapsed. The two international companies were adamant that the cost of landing must be between US$0,70 and US$0,90 a litre if they were to make profit, but government was adamant that it should be US$0,60” said a sources, who declined to be named.

As a result, the source added, the two companies opted out of the deal forcing NOCZIM to look for other alternative sources of fuel, including Equatorial Guinea.

Last year, a high-powered government delegation went to Equatorial Guinea to hunt for fuel. The team was headed by Energy and Power Development minister Mike Nyambuya, and included Reserve Bank governor Gideon Gono.

Government has been on the hunt for fuel in Equatorial Guinea and Libya in recent months.

In the past, President Robert Mugabe’s government obtained but failed to pay for fuel from Kuwait, Libya and other countries resulting in supplies being stopped. Efforts to secure fuel from Iran, Sudan, and Angola also failed because of Harare’s poor payment record.

The country has been without adequate fuel since 1999 due to lack of foreign currency and the severing of lines of credit by foreign banks and international money-lenders.

Zimbabwe cannot get lines of credit due to its poor credit rating and high political risk.

Zimbabwe consumes 3,5 million litres of diesel, three million litres of petrol and five million litres of Jet A1 daily. The country needs about US$130 million a month to import fuel.

In March, government came up with a plan to use diamonds illicitly mined from Marange in Manicaland province in exchange for fuel from Equatorial Guinea.

The two countries developed strong diplomatic and trade relations after the arrest in 2004 in Harare of alleged mercenaries led by Simon Mann who were purportedly en route to Equatorial Guinea to overthrow that country’s government.

Zimbabwe received fuel worth US$24 million from Equatorial Guinea which it was unable to pay for, resulting in the government coming up with three options to settle the debt.

The options were: sourcing the fuel through the purchase and sale of diamonds; NOCZIM supporting the Minerals and Marketing Corporation of Zimbabwe with financial resources to mop up diamonds for resale; and the state-run oil procurement company going into diamond mining.

While the energy ministry was in support of the first option, the central bank opposed it saying the process was flawed.

In turn, the RBZ said it could come up with a debt settlement agreement with the West African nation “rather than be part of an illegal process”.

It was reported recently that government was negotiating with a Libyan bank for a fuel line of credit, but the deal was said to be far from being sealed after the financial institution demanded guarantees for loan repayments.

The National Economic Recovery Council reportedly recommended the use of diamonds, beef or tobacco to back up the line of credit.

Efforts to get a comment from NOCZIM chief executive officer
Zvinechimwe Churu were in vain yesterday as he was reportedly out of
his office.

-
Cuthbert Nzou- ZimOnline

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