Zimbabwe Review

Reflections on Zimbabwe

Yet another claimed oil deal for thirsty Zimbabwe

Posted by CM on December 17, 2007

We have had our hopes stirred by so many of these claimed oil deals over the past eight years of fuel shortages. None of them ever amounted to anything.

Here’s the latest one, in The Herald of December 17:

Zim strikes oil deal

ZIMBABWE has struck a deal with Equatorial Guinea in which the petroleum-rich West African country will supply crude oil, a Government official has said

“Following our engagement with Equatorial Guinea . . . Zimbabwe can now even get crude oil and arrange for its refinement through third parties,” said Industry and International Trade Minister Mr Obert Mpofu in his information memorandum to the Cabinet on his trade and investment mission to Angola recently.

The Government and Iran have already agreed to work on the refurbishment of the oil refinery here whose equipment has become obsolete. The refinery was built in the 1960s using Iranian technology and an agreement was sealed during former president Mohammad Khatami’s last visit to Zimbabwe.

Mr Mpofu said the Government was working on arrangements of paying for crude oil imports from Angola. Angola has been concerned with Zimbabwe’s payment terms. However, following consultation with stakeholders by the Ministry of Energy and Power Development, indications were made to the Angolan Ministry of Petroleum that Zimbabwe is comfortable with a 90-day credit facility. Alternatively, Zimbabwe could also repay with a refined product. In that respect, Zimbabwe would send a team to Angola to pursue the matter at a technical level.

Zimbabwe has been facing acute fuel shortages over the past seven years, a development that has affected key sectors of the economy such as tourism, manufacturing and mining. This has prompted the Government to look for alternative ways of producing fuel, including extracting bio-diesel from jatropha seeds and vegetables.

President Mugabe last month commissioned a multi-billion-dollar bio-diesel plant capable of producing at least 100 million litres of diesel per year, saving the country at least US$80 million annually.The plant is of its first kind in Africa. Plans are underway to set up such plants in all provinces.

There are also moves to revive the ethanol plant in Triangle.

As a Reuters report on the Herald story points out,

Zimbabwe agreed in 2005 with Iran to revive an oil refinery built using Iranian technology in the 1960s. Work at the refinery has not started to date.

This is not the first purported oil deal with Equitorial Guinea. None of the others came to fruition. What is different this time?

And it sounds very convoluted. The connection between oil from Eq. Guinea and payment needing to be made to the Angolans is far from clear to me!

Zimbabwe might very well be “comfortable with a 90 day credit facility,” but it is doubtful that anyone else who knows the problems the country has been experiencing all these years would be. The crazy idea to pay back the Angolans for their crude oil with refined fuel sounds like yet another of the many hare-brained schemes Zimbabwe’s desperate straits have forced the country’s rulers to conjure up over the years.

What would be in it for the Angolans? Flush with oil cash as they are, they could/should simply build up their own refining capacity. With their cash reserves, I can’t believe that would be so much more difficult than having to depend on the revival of a forty-something years old refinery in another country. The mess, logistics and expence of shipping crude one way and refined product the same way back to the original source would be silly. I cannot believe this is an option that would be seriously considered by the Angolans.

Apart from the implausibility of the story, the need for “reviving” both the Iranian built refinery and the sugar cane-based ethanol plant in Triangle is telling: They should never have been allowed to go to seed in the first place! Why were they? Is the money for the big capital expenditure required to refurbish them available, when the country cannot even import enough maize maize seed for the current farming season?

If the oil refinery was revived, how would the country afford to import the crude oil it has been failing to do in sufficient quantity for close to ten years now? Forget about private investors doing it: they would insist on charging fuel prices that made it possible to recoup their investment in re-starting the refinery, and we have seen over the years that this simple concept is not acceptable to the Zimbabwean government.

As for the Triangle plant, where is the feedstock going to come from when a lot of the area’s sugar cane production has plunged over the years, creating shortages of sugar on the market? Price controls have also been a concern, with producers being forced to sell sugar at prices below the cost of production, with predictable results-shortages on the local open market, a thriving black market and a preference for exports over supplying the domestic market. With none of these issues having been resolved for sugar, how would ethanol production be different?

As for the “100 million litres of biodiesel a year” from the new plant, I will believe that when I see the first drop. I have previously dealt with the reasons for my doubts about the workability of this otherwise good idea at this messy time in Zimbabwe.

Sadly, this latest Herald story is how the country has been strung along for eight years now. No one takes these stories of new breakthroughs too seriously anymore, and with good reason. They are too full of holes.

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