Fuel alternatives ‘a work in progress’

THE Ministry of Mines and Energy has said it is looking at other alternatives for sourcing fuel for the country.

Mines and Energy Permanent Secretary Joseph Iita told The Namibian last week that the Government was looking at other sources besides South Africa, and other means to make the precious liquid more affordable to all Namibians. Namibia currently depends 100 per cent on the import of petroleum products procured and processed in foreign countries, mainly South Africa, as the country has no refineries.One of the options under consideration is the Republic of Congo, whose President Denis Sassou Nguesso extended an invitation for Namibia and Congo to work together in the energy sector when he was on a state visit to Namibia early last month.”The offer from the Republic of Congo is a viable proposition.We have already started to engage our counterparts that accompanied His Excellency during his visit to Namibia.We are looking at various options in this regard,” said Iita.The Ministry of the Mines and Energy will also soon go on a fact-finding mission to Venezuela aimed at finding out the type of bilateral arrangements that can be reached between the two countries’ petroleum sectors.Iita added that diversification of procured resources was also an important element and was work in progress, which could neither be done hurriedly nor haphazardly.He said: “Namibia has no refining capacity of its own and was that the case the country would be better placed to source crude oil from various sources on a least cost basis.This brings in an element of diversifying the country’s fuel supply sources that will also minimise the risk of any supply disruptions.”Fuel prices will continue on a see-saw, said Iita, due to the supply and demand of crude oil mainly driven by geopolitical, economic and production factors.According to local economist Martin Mwinga, chances are good that oil prices will remain above US$70 (around N$500) per barrel and could even shoot beyond US$80, mainly due to political risks.He explained that the main reason why oil has risen from US$27 barrel over the past four years was the high demand for oil as a result of strong global economic growth.”We have seen China and India also increasing their industrialising base and growing at the fastest pace over the past four years and they have become major consumers of oil.The volatility however, has been caused by geopolitical risks with Iraq, Iran, North Korea causing these risks,” he said.Mwinga said the fuel issue should be seen in historical context and that consumers should take note of the fact that South Africa has economies of scale which favour Namibia to get fuel at relatively lower prices.He said neighbouring Angola – a major African oil producer – was currently out of the question as an alternative source because the cost of processing and refining there was quite high and would in turn translate into high petrol prices.Fuel prices went up twice within a month in July, leaving Windhoek prices at N$7,09 per litre of 95 octane unleaded petrol, 93 octane lead replacement petrol (LRP) at N$7,07 a litre while diesel is at N$6,89 a litre.The world supply is currently well short of the demand, and producing nations and cartels such as Opec can influence the price by slowing production output.According to Iita, the geopolitical issues dominate the market sentiments to a large degree, and are potential triggers to higher oil, which is a key parameter to the pump price.”For strategic reasons the prices of petrol and diesel are controlled/regulated by the government through the Ministry of Mines and Energy.An equalisation fund (National Energy Fund) is in place to even out these price fluctuations which at times can be severe,” said Iita.The Ministry announced last week that there would be no change in fuel prices this month.Namibia currently depends 100 per cent on the import of petroleum products procured and processed in foreign countries, mainly South Africa, as the country has no refineries.One of the options under consideration is the Republic of Congo, whose President Denis Sassou Nguesso extended an invitation for Namibia and Congo to work together in the energy sector when he was on a state visit to Namibia early last month.”The offer from the Republic of Congo is a viable proposition.We have already started to engage our counterparts that accompanied His Excellency during his visit to Namibia.We are looking at various options in this regard,” said Iita.The Ministry of the Mines and Energy will also soon go on a fact-finding mission to Venezuela aimed at finding out the type of bilateral arrangements that can be reached between the two countries’ petroleum sectors. Iita added that diversification of procured resources was also an important element and was work in progress, which could neither be done hurriedly nor haphazardly.He said: “Namibia has no refining capacity of its own and was that the case the country would be better placed to source crude oil from various sources on a least cost basis.This brings in an element of diversifying the country’s fuel supply sources that will also minimise the risk of any supply disruptions.”Fuel prices will continue on a see-saw, said Iita, due to the supply and demand of crude oil mainly driven by geopolitical, economic and production factors.According to local economist Martin Mwinga, chances are good that oil prices will remain above US$70 (around N$500) per barrel and could even shoot beyond US$80, mainly due to political risks.He explained that the main reason why oil has risen from US$27 barrel over the past four years was the high demand for oil as a result of strong global economic growth.”We have seen China and India also increasing their industrialising base and growing at the fastest pace over the past four years and they have become major consumers of oil.The volatility however, has been caused by geopolitical risks with Iraq, Iran, North Korea causing these risks,” he said.Mwinga said the fuel issue should be seen in historical context and that consumers should take note of the fact that South Africa has economies of scale which favour Namibia to get fuel at relatively lower prices.He said neighbouring Angola – a major African oil producer – was currently out of the question as an alternative source because the cost of processing and refining there was quite high and would in turn translate into high petrol prices.Fuel prices went up twice within a month in July, leaving Windhoek prices at N$7,09 per litre of 95 octane unleaded petrol, 93 octane lead replacement petrol (LRP) at N$7,07 a litre while diesel is at N$6,89 a litre.The world supply is currently well short of the demand, and producing nations and cartels such as Opec can influence the price by slowing production output.According to Iita, the geopolitical issues dominate the market sentiments to a large degree, and are potential triggers to higher oil, which is a key parameter to the pump price.”For strategic reasons the prices of petrol and diesel are controlled/regulated by the government through the Ministry of Mines and Energy.An equalisation fund (National Energy Fund) is in place to even out these price fluctuations which at times can be severe,” said Iita.The Ministry announced last week that there would be no change in fuel prices this month.