National Oil Company of Malawi (Nocma) last week took members of the Parliamentary Committee on Natural Resources and Climate Change to Dar es Salaam, Tanzania to deepen the legislators’ understanding of the fuel supply chain. During the trip, the stakeholders were taken to Nocma suppliers, notably Lake Oil Group and Camel Oil Limited as well as Malawi Cargo Centres Limited and Tanzania Bulk Fuel Procurement Agency. The Nation Editor AUBREY MCHULU engaged Nocma Deputy Chief Executive Officer Helen Buluma on the sidelines of the trip to outline fuel supply challenges and possible interventions amid the disruption in the global supply chain that has induced a scramble for the commodity. Excerpts:
The Russia-Ukraine conflict is creating panic among oil marketing companies and consumers. What is Nocma’s strategy to ensure sustainable fuel supply in Malawi?
Indeed, the global fuel supply chain situation has become more unpredictable and complex with demand for petroleum products very high with Europe and the rest of the world shifting their petroleum importation source to the Gulf due to the sanctions imposed on Russia at a time when supply of petroleum products was already low due to the Covid-19 pandemic. This has caused a scramble for petroleum products on the global market. Nocma, as the Malawi Government’s main agent for fuel importation and the management of the strategic fuel reserves has taken several measures to ensure seamless supply. Nocma has increased its importation share from an average of 25 million litres to 60 million litres as requested by Malawi Energy Regulatory Authority [Mera].
. What else is being done towards the desire situation?
. Nocma has also entered into negotiations with the Tanzania Petroleum Bulk Procurement Authority, which will allow Nocma to import under the Tanzania Government system and benefit from the economies of scale to ensure that landed cost of fuel is reduced as the global prices of fuel are on the rise. Thirdly, Nocma is creating buffer stocks at both Dar es salaam and Beira port [in Mozambique] as a way of complementing our fuel storage capacity in country.
. From your presentations during meetings with your two key suppliers the picture one gets is that it has been “by God’s Grace” that Malawi has had uninterrupted supply in recent months. Foreign exchange availability appears to be the main problem. What is your long-term strategy other than banking on suppliers’ goodwill?
The whole world is suffering from one of the worst energy crises since time immemorial and big developed countries such as the UK, USA and the European Union bloc have not been spared. Closer to home, we have seen Kenya, Nigeria and Uganda facing stock-outs and dealing with huge fuel supply challenges. Malawi has survived. Nocma is working with different stakeholders to ensure that the country does not stock out at any point in time.
. How do you plan to achieve that?
. Nocma has embarked on a drive to identify alternative fuel financing sources to complement the current available financing as a way of diversifying fuel imports financing to deal with the global price increases. Currently, Nocma has access to a total of $105 million fuel procurement financing, but working to increase the total to $200 million to ensure sustained financing in a context where global oil prices are projected to continue increasing. In addition to this and as a way of dealing with the forex challenges, Nocma is negotiating for longer tenors than the current 90 days.
During this trip, the Parliamentary Committee on Natural Resources and Climate Change has renewed its lobby to have Nocma as a sole importer of fuel. Now the committee is talking of 100 percent, not 90 percent. What is your take on that?
The Liquid and Fuel Gas Act of 2004 is clear about the share of importation, which is that importation quota given on account of the storage capacity of the importers. As it is, Nocma holds 78 percent of the storage capacity in the country and imports almost that much. Allow me to clarify that the 50:50 share that has been reported is specific for four oil marketing companies that belong to PIL [Petroleum Importers Limited], namely TotalEnergies, Puma Energy, Engen and Petroda. This is where Nocma shares 50:50 importation with PIL for normal daily consumption. But, over and above that, Nocma imports volumes for the strategic fuel reserves as storage stocks as well as for the other oil marketing companies that do not belong to PIL as well as the manufacturing industry at large. We are, therefore, already importing over 78 percent of the volumes into the country. Currently, Nocma is investing K18 billion in its storage tank expansion project and by 2024 Nocma’s storage capacity will increase from the present 60 million litres to 120 million litres, which will enable Nocma to handle 100 percent of the fuel imports.
Much has been said about the fuel supply chain. Can you unpack this process to our readers?
The fuel supply chain is a very large and complex one and most of the times it is misunderstood. It’s a combination of both international trade and local in-country logistics. The chain is divided into three segments, namely the upstream which involves product exploration, extraction and refining. Then there is the midstream which is importation, transportation and distribution of product and wholesalers, among others and finally we have the downstream which involves the retail business and distribution to the last user. Currently, Nocma’s business is mainly within the midstream segment although the company is required to interact and interface with all the segments at different times and levels.
What prompted you to take the committee of legislators to visit your suppliers in Tanzania?
The Natural Resources and Climate Change Committee is one of the committees which has oversight functions over energy issues in Parliament and has on numerous occasions engaged Nocma on its operations in relation to security of supply. The trip to Dar es Salaam was organised as part of that oversight role and mainly to enable the members appreciate the impact of the ongoing global fuel supply challenges on Nocma’s suppliers, find out what strategies Nocma has put in place at the Dar es Salaam port to ensure undisrupted inflows of fuel from that particular port into Malawi as well as to appreciate the challenges that are currently being faced in terms of product importation in the context of the global fuel supply crunch.
In conclusion, what message do you have to the public and stakeholders?
Nocma is doing its utmost best to ensure that Malawi does not run dry as the world faces rising global prices as well as a fuel supply crunch. Malawian consumers should, therefore, not panic or react to any shortage speculations as has been the case over the past few weeks where fake social media reports have led to instances of panic buying. n