Explain oil deals

Tue, 11 Sep 2012 15:32:30 +0000

The Government owes the people of Zambia an explanation over the two oil deals recently awarded to Trafigura and Gunvor.

Not a single technocrat in the oil industry has said anything. Everything we know has come from a lay man Mr. George Zulu, the Permanent Secretary at the Ministry of Energy.

A lot has been said and written about “oilgate”, but little has come by way of explanation from the Government. Most negotiations have been behind closed doors and from the tidbits we have gleaned, the process has not been without controversy.

The two companies awarded the oil supply contracts were among 23 companies that tendered for the contract, and after protracted negotiations an award was made, in a manner that appears to have been devoid of the normal procedures prescribed by the Public Procurement Authority.

The award to Trafigura was challenged by KenolKobil among others which lodged a formal protest with Government. They felt unfairly disadvantaged by the award because they had offered better prices.

We now understand that the challenge by Kenolkobil has been withdrawn. This follows reports that Trafigura has actually acquired interest in KenolKobil.

It is interesting that Trafigura the company that will be supplying Zambia is also the owner of Puma Zambia, the retail outlet purchased from Shell BP.

In essence Trafigura will be the source, wholesaler and retailer of petroleum products in Zambia.

Whether or not this arrangement is tenable legally or otherwise remains with such institutions as the competition commission and those involved in management of government related contracts.  But it will be recalled that two weeks ago Puma, which is a subsidiary of Trafigura was fined K50bn by the competition commission in Zambia for disregarding post acquisition regulations.

These facts do not bode well especially that the government finances the procurement of oil. In essence therefore the government or rather the taxpayers will be financing the purchase of more expensive fuel, as Trafigura was fifth on price.  Secondly in order to cushion the resultant prices, the government may have to subsidize the pump price meaning that the tax payer will be paying twice for oil on which duties and taxes are further imposed making Zambia as one country with the most expensive oil in the region.

An explanation is in order.