Botswana Oil Limited takes custody of the fuel commodity

For time immemorial, the importation, distribution and general management of this strategic commodity has been in the hands of private sector without any influence and oversight of the Government, writes MESHACK TSHEKEDI*

The Botswana Energy Regulatory Authority ( BERA)’ s recent award of a 25percent import license to Botswana Oil Limited ( BOL) has been applauded by many who understand the dynamics of the oil and gas industry and the implications of having a strategic commodity such as fuel, left in the hands of the private sector.

An estimated 60percent of Botswana’s energy needs is provided by petroleum products, with diesel and petrol being the most widely used in industry. To a great extent, Botswana’s mining operations, transport ( business and private), water purification, electricity generation and industry in general depend on diesel. For time immemorial, the importation, distribution and general management of this strategic commodity has been in the hands of the private sector without any influence and oversight of the Government. This has left the country exposed in terms of security of supply as the private sector is driven by commercial imperatives only, as opposed to national strategic objectives. This includes the government strategic storage depots that have been under the management of multi- nationals until 2017 when BOL took over the full operation of the Gaborone Depot, along Haile Selassie Road.

The establishment of a National Oil Company was on the government agenda for many years, all in a quest to give the government some level of influence in the management of such a strategic commodity for the country.

It has been seven years since Botswana Oil Limited ( BOL) was established. The company was established to be the Government’s agent for transformation of oil and gas industry. Key enablers for this transformation include promulgation of enabling legislation like the Botswana Energy Regulatory Authority ( BERA) Act and the Petroleum Products Bill.

These instruments would empower BOL to take up its rightful position and represent the interests of Government in the oil sector. The delay in the promulgation or implementation of these enablers has seen BOL operate under the willing- buyer, willing- seller business environment since inception. The award of the import license by BERA is a step in the right direction and a fulfillment of one of the requirements.

Through the license, BOL has come of age and will start operating in accordance with the statutes that brought it into existence.

The import license awarded to BOL has far reaching implications on the development of the oil and gas industry in Botswana. It will accord the government, through its arm BOL, a voice in the importation of petroleum products, a move which is central to the strategy of security of supply for the country. Through the consolidation of imports, BOL will have the necessary economies of scale to negotiate the best prices for the country and most importantly, allow the country to have an influence on decisions of how and when petroleum products flow into the country. Currently, this is out of sight and influence of the government. With a strategic commodity such as fuel, it is prudent for the government to have oversight of how it is procured, stored and managed. Through the import license, BOL will consolidate 25percent of the import volumes and such consolidation will give BOL the leverage to benefit from economies of scale and negotiate better prices and margins for the country.

This is in contrast to the obtaining market structure where this strategic activity is done outside the country by private companies which are currently responsible for the importation of 90percent of the country’s petroleum products’ needs. With BOL in charge of some percentage of imports, the benefits that will be realised in the form of supply margin will be reinvested into the development of storage infrastructure, both at home and in coastal areas where BOL has plans to invest in storage to ensure security of supply. Currently, this margin accrues outside the country and benefits other economies.

Part of BOL’s mandate emphasises the facilitation of citizens through the lowering of barriers into the oil and gas sector. BOL thrives to realise this through training and capacity building covering various aspects along the value chain of the industry, the reservation and preferential procurement of certain activities such as transportation of fuel, only for citizens and supplier development amongst others. With the scale that will be realised from the 25percent import license, BOL will have some level of leverage to perform even better in these areas.

Even though BOL had applied for a 50percent import license, the 25percent awarded is a welcome development which will accord the company an opportunity to ease into the increased mandate when a higher percentage is eventually approved. Since establishment, BOL has been working tirelessly to prepare for the full implementation of its mandate and this has seen the Company embark on key strategic projects to increase its storage facilities’ capacity and put systems in place to support this and develop the industry holistically.

The award of an import license means that BOL will require the support of all players in the industry to successfully implement. This means that 25percent of the country’s annual 1.2 billion litres will be reserved for BOL to import into Botswana.

The import license award to BOL will result in benefits for the whole nation. With the license in hand, BOL will continue working with International Oil Companies and Citizen Owned Oil Companies to ensure security and sufficiency of petroleum products in- country. The license is a call to all players in the industry to work together to build an oil and gas industry that ensures security of supply for the country to avoid shortages such as the one the nation experienced in June and July 2020.

The next few months as implementation of the license commences, stakeholder consultations will be conducted with all affected parties. As the awarding authority and the national regulator, BERA will lead most of the engagements with the various interest groups, supported by the Ministry of Mineral Resources, and Green Technology Energy Security.