Govt invites partners to participate in ethanol production

Govt invites partners to participate in ethanol production

Energy Minister Samuel Undenge

GOVERNMENT has called for new investors to participate in ethanol production in order to boost supplies, Energy Minister Samuel Undenge told a Luncheon Seminar on Fuel supplies and pricing models in Harare last week.

Ethanol is only purchased from a licensed ethanol producer who is in a joint venture partnership with government. Currently Green Fuel is the only licensed ethanol producer that meets this requirement.

“We are therefore encouraging new investors to participate in ethanol blending, provided they are agreeable to a partnership with government”, he said

“Government would like more players in this area so as to boost ethanol supplies and introduce competition, which would in turn reflect on the price of ethanol on the market”

Since the time of the SI of 2013 on petrol blending, the country has moved from E5 to E15.Great benefits have been achieved through the introduction of blending but the greatest constraint has been in the supply of Ethanol. Green Fuel is not producing at the moment as the plant is under care and maintenance. Ethanol is being bought from Triangle whose stock supplies will last up to the end of February 2016.

The ministry is currently developing a National Bio-Fuels policy which seeks to stimulate and sustain the development and expansion of bio-fuels. It seeks to establish long term targets and time frames for increasing the share of bio-fuels in the fuels mix, in line with international best practices. The policy will guide the development of the bio-fuels sector in Zimbabwe.

Turning to fuel supplies, the minister said that there was adequate supply of fuel nationwide. The country currently requires an average of 1.5mln litres of petrol and 2.5mln litres of diesel on a daily basis.

“We currently have diesel stocks to last up to the next two and a half months and petrol stocks to last  up to the next one and a half months”, he said

In terms of prices, he said they are determined through a fuel pricing model known as Fuel Cost Build-Up. The model takes into account all costs elements which included FOB price, pipeline costs, taxes and levies, administrative and distribution costs and profit margins. Currently taxes and levies constitute the greatest share at 43 cents/litre for diesel and 49 cents/litre for petrol.

The minister also added that the price of fuel in Zimbabwe is directly affected by the international oil prices but specifically the price of the refined product, as the country does not import crude oil. Further costs are incurred in refining the crude oil and transporting the finished products from the source to the end user.

“The price of refined product cannot be the same as the price of crude oil because of the value addition costs to refine crude oil into petrol or diesel and the transportation of the refined product to the receiving port”, he said

“Although prices of crude oil are falling at a higher rate on the international market, there is a lesser percentage fall of the price of refined products”, he said

The minister added that there are ‘internal factors’ in the form of costs elements that affect the FOB prices.

Local pump prices have been going down in tandem to the movements in the crude oil prices ad FOB prices. The maximum pump price of petrol has fallen from around $1,52 in June 2015 to $1.27 per litre as of I Feb 2016.The price of diesel has also declined from $1.38 per litre to below $1.05 per litre.

In terms of regulation, the minister added that fuel prices are reviewed on a weekly basis to ensure a quick response to movements in international oil prices and any other related costs. This is unlike the situation in South Africa, which reviews on a monthly basis.

“ZERA implements fuel price changes whenever there is movement of prices on the international market. They also monitor pump prices to ensure retailers comply with the permitted maximum prices”, the minister said

The comparison of neighbouring countries shows that Zimbabwe currently has the highest prices and it is the desire of the ministry to ensure that prices are in tandem with that of the region.

To this end ZERA has hired a consultant to carry out a Petroleum Sector Pricing Study. The study will critically examine all the cost elements with a view of reviewing the Fuel Costs Build Up.

Players were urged to comply with all regulations governing the petroleum sector. Regulations in place relate to fuel pricing, fuel quality, safe handling of fuel, mandatory blending and licensing. FinX

 Follow us on Twitter on @FingazLive and on Facebook – The Financial Gazette

Connect With Us

Fingaz Polls

CEO term limits...good or bad idea?