A F R I C A
Indeni continues to face problems
The Indeni oil refinery in Zambia has been an on and off affair from the time an Italian company built it for the government in 1975. Frequent shutdowns due to insufficient feedstock supply, power outages, lack of maintenance, accidents and strikes – in particular over the past two decades – have adversely affected operations and production at the plant located at Ndola, in the southern African Copperbelt. Alfred Sayila reports.
C
osting less than $3mn to build in the 1970s, the Zambian govern- ment has spent more than
$600mn on refinery repairs and renova- tions in a bid to keep the facility opera- tional over the past 15 years. Intermittent plant shutdowns due to feedstock shortages have placed an extra cost burden on the government, as has the subsequent import of refined fuel products in a bid to meeting the country’s ever growing demand for energy. Meanwhile, a planned major rehabil-
itation and product expansion pro- gramme has had to be delayed. The Zambian government, in partnership with its original partner, Total of France, had committed some $65mn for the refinery’s recapitalisation over five years – however, to date, only two- thirds of the necessary $65mn of funding has been secured. As a result, the refinery has been unable to reach its production target of 150,000 l/d (23,800 barrels) and shortfalls have had to be met by expensive imports. This has meant that the Zambian govern- ment, via the Energy Regulation Board (ERB), has been forced to increase the price of fuel at the forecourt each time there has been a rise in the price of oil on the internationalmarket. An official at the ERB jokingly told Petroleum Reviewthat each time the oil producers coughed, Zambia got the cold. ‘We are at the mercy of the oil producers in the Middle East,’ he said. For example, in February this year,
the ERB was forced to increase pump prices by almost 5% as the interna- tional oil price rose above $100/b fol-
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lowing continued political unrest in Africa and the Middle East. The cost of oil imports to Zambia rose from $68.6mn in May 2010 to $81mn in December 2010.
A long way to go It is estimated that full rehabilitation of Indeni will cost at least $300mn. However, as already noted, the renova- tion programme has been delayed due to a lack of funds. In a short interview with PetroleumReview, theMinister of Energy, Kenneth Konga, noted that the Indeni plant had ‘a long way to go’ before it had ‘a proper facelift and rehabilitation to cope with crude oil imports and high production levels’. He said his government needed a lot of money to spearhead themodernisation programme, which will include the acquisition of new equipment for the plant and the construction of storage facilities that will have the capacity to hold some 2mn litres (12,600 barrels) of fuel. ‘I amafraid funds are not forth- coming for this project and it is a chal- lenge to the government,’ he stated. Konga also pointed out that the
hydrocracker and desulphurisation unit at Indeni – a necessity for it to be able to process all grades of crude, including heavier crude feedstock from neigh- bouring Angola, to produce a range of cleaner fuels for the domestic market – although acquired, had yet to be installed. As a result, the plant con- tinues to process co-mingled lighter crudes fromtheMiddle East and south- east Asia, a more costly operation than utilising a hydrocracker to process heavier crudes.
Zambia Konga further explained that recapi-
talisation of Indeni will depend on the findings of a study that the govern- ment is currently undertaking to deter- mine the best way of supplying petroleum products in Zambia. ‘We have towait for the report to come out before anything can be done,’ he com- mented. He also noted that the gov- ernment was still to decide on how best to proceed with the 50% stake it recently acquired from Total for $5.5mn. The French oil giant decided to sell its interest in the project following continued delays to the refurbishment and recapitalisation programme. The government must decide on whether to bring in another strategic foreign partner and/or simply sell the shares on the local bourse, the Lusaka Stock Exchange. It has been reported that a number of foreign players have already expressed an interest in participating in the project. Meanwhile, a reliable source at the
Ministry of Energy has reported that the Zambian government is also studying proposals for the possible pro- duction of diesel from coal, a tech- nology already well proven in South Africa and China. However, this will mean installing new coal-to-liquids (CTL) equipment at the Indeni facility and significant investment. Proponents of the CTL methodology argue that it will guarantee energy security both in the medium and long term due to the availability of abundant coal reserves in Zambia.
Problems in the pipeline Currently operating at half its capacity, Indeni is also struggling to cope with interrupted supplies of feedstock from the Tanzania-Zambia (TAZAMA) pipeline, which has been hit by a number of operational problems including pump failures, pipe blow- outs, power outages, poor manage- ment and illegal fuel vending. Such problems have reportedly led to the pipeline losing between 10% and 15% of its oil supply capacity on a daily basis – losses valued at some $1.3mn/d. An integral part of southern Africa’s fuel supply chain, the TAZAMA pipeline cur- rently operates at half its 1.1mn t/y design capacity. On a more positive note, it is hoped
that an increase in revenue from min- eral exports, in particular copper, the price for which has reached $10,000/t, will help fund the future modernisa- tion and expansion of Indeni. However, this will very much depend on the pre- vailing economic environment and the political will of the government, which goes to the polls later this year.
PETROLEUMREVIEW APRIL
2011
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