By Dr Lubinda Haabazoka Economist, Researcher, Consultant, Academician
We have received the news with shock that the government has put Indeni on care and maintenance which is a route usually to liquidation or privatization of a company.
Many Zambians might not know what the Indeni oil refinery is, so I will give a brief overview of the plant using information available from different sources:
The petroleum refinery is described in some publications as a “very small and simple refinery”. It was constructed in 1973, with the capacity to refine 24,000 bbl/d of crude oil and process 1,200,000 tonnes (1,322,774 tons) of feedstock annually. Crude oil is imported via the Kurasini Oil Jetty in Dar es Salaam, Tanzania, and is delivered to the refinery through the 1,704 kilometers (1,059 mi) Tazama Pipeline. The annual delivery capacity of the pipeline is also the annual processing capacity of the refinery.
The Indeni Refinery is configured as a Hydro-skimming refinery. Designed in 1973, the refinery is not able to refine pure crude at commercial levels and processes spiked crude.
The products manufactured in the refinery are the result of the refining crude. Crude is primary a liquid of widely varying chemical and physical properties.
The principal element in crude is carbon and hydrogen arranged as hydrocarbons also Sulphur, hydrogen, oxygen, and water. The main products from crude are white and black products. White products contain no Sulphur, the lightest among them being LPG.
The following is the list of products extracted from crude:
- LPG, Butane, Light gasoline,
- Heavy gasoline,
- Special cut kerosene,
- Jet A1,
- Industrial kerosene,
- Illuminating kerosene,
- Low Sulphur gasoil,
- Automotive gasoil,
- Fuel oil,
- MC30 and Bitumen.
INDENI Plants sector comprises of five main processing units:
When the refinery was established in 1973, it was owned and managed by Indeni Petroleum Refinery Company Limited, a 50/50 joint venture between the government of Zambia and Eni, the Italian energy conglomerate, through their subsidiary Agip Zambia. Under the terms of the joint venture, Eni was responsible for the management of the refinery. In 2001, Eni sold their shareholding to Total S.A., through their subsidiary TotalFinaElf. Total took over management of the refinery. In 2009, Total S.A. sold their shareholding to the Zambian government for consideration of US$5.5 million.
Since then, there have been attempts to bring on-board a strategic partner with funding and expertise to upgrade, modernize and expand the refinery.
In 2017, the World Bank stated that the Indeni Petroleum Refinery was “inefficient and technologically unsuited for current fuel needs”. Its capacity is too small. It does not produce refinement products that larger, more efficient refineries can. For the amount of resources expended to keep it running, the government can do better towards meeting their national petroleum objectives.
In order to meet increasing petroleum products demand both nationally and regionally, there are two choices (a) build a new modern refinery that meets current and future national and regional needs or (b) expand and modernize the present refinery to improve its efficiency and output. Building a new refinery is ruled out by its cost. Rehabilitation, expansion, and modernization have been estimated at about US$500 million. As the government considers its options, the capacity at the refinery has dropped to 21,000 bbl/day. The last hope is to find a deep-pocket investor who can buy a stake in the present refinery and modernize it.
Indeni is so intimate and important to Zambia that the decision to close cannot be arrived at it without giving citizens chance to have an input in the discussions.
Ndola before 1991 was an industrial hub of Zambia employing many Zambians. Ndola had companies like Vitafoam, Dunlop, a metal refinery among the many industries. Today, where we used to make Dunlop tires, is jacaranda mall selling imported goods.
In Livingstone for example we were making ITT Television sets. By now we would have been making plasma TVs in Livingstone with the innovative youth we have in this country. Livingstone is also a shell of itself.
Luanshya used to make the best suits in Africa that were being sold in European boutiques.
Zambia through Memaco had control over its minerals resources right there at the London Stock exchange.
In the era of energy security, Kenneth Kaunda in his wisdom decided to build Indeni because it was very cumbersome to move fuel in trucks and by rail. The logistics were not just adding up.
Now from the way industry was developed by Kaunda and his team, you could see proper planning because each province had town-forming companies. Because in 1991 we decided to erase everything that had Kaunda on it, we even sold off companies like Zambia Airways which mistake we are trying to rectify today.
You see, Indeni is not just about 300 direct employees, it’s about the entire infrastructure that was built from Dar Ed Salaam to Ndola. It’s about Sports (Indeni FC). It’s also about energy security as tanker drivers will not hold the government at ransom every time the kwacha dollar rate shifts by a ngwee. Imagine also the damage to the roads and just the cumbersome nature of moving fuel on the roads. I know tanker owners might be happy about the closure of Indeni but this is about the Zambian people.
To upgrade Indeni all we need is $500m. In August we received a gift of $1.2bn from the IMF. Why can’t we use that money for enhancing our energy security? If that money is earmarked for employing 40,000 civil servants then please engage us finance experts to advise on how we can bring on board an equity partner as has always been the case. I know the Russians are interested, the Chinese are interested, the Middle East is interested but the west is not because they want the plant to completely shut down. To shut down not only a legacy but compromise our energy security.
Zambia has experts. My appeal is that government brings us on board to advise on what to do. There are people willing to take charge of Indeni and reform it without even asking for a coin from the central government!
Indeni posts dividends through IDC so it’s not a loss-making company. Let’s not listen to those that want to lend us $1.5bn in exchange for more liquidations, privatizations, tariff hikes among other things. Zambia has the brains to turn around this country without getting any cent from abroad! We just need to be revolutionary in our thinking.
Economic liberalization they tell us doesn’t apply to them otherwise during COVID, they would not have printed trillions of dollars to give it free to their citizens. That’s communism! But why should we put our citizens in pain?
Once the oil tanker mafia takes control over fuel importations, we shall start having shortages because they will only import commodities that they deem profitable. This we saw in July when they refused to import diesel. Government business is not about profits. The government’s role in the economy is to produce a social effect. I.e create jobs, reduce prices for citizens, among other things. Indeni fuel model is the best for the country.
Please listen to us. We care that’s why we speak