National Oil Company of Malawi (Nocma) has reached a tentative deal to start transporting fuel out of Beira Port through Mozambique-Zimbabwe pipelines, Business Review has learnt.
Nocma director of operations Micklas Reuben, who is also the company’s spokesperson, said in a written response on Monday that a draft pipeline transportation contract is currently under legal review.
The deal involves Companhia do Pipeline Mozambique-Zimbabwe (CPMZ) Limited, National Oil Infrastructure Company of Zimbabwe (Noic) and Nocma.
CPMZ is the Mozambique-based firm that owns and manages a 294-kilometre (km) fuel pipeline from Beira Port to Feruka in Zimbabwe’s eastern town of Mutare.
On the other hand, State-owned Noic, through its subsidiary PetroZim Limited, owns and operates the 208-km Feruka-Harare pipeline that is connected to CPMZ.
CPMZ owns and runs the pipeline that transports fuel from Beira to Zimbabwe
Reuben said since the technical committee of the Nocma board met at its 23rd meeting held on September 6 this year and gave management approval to proceed to engage CPMZ and Noic, Nocma has moved with speed to seal the deal.
He said on September 19 2023, tripartite meetings were held in Feruka involving the Malawi delegation that included Ministry of Energy, Malawi Energy Regulatory Authority and Nocma on one hand and CPMZ as well as Noic on the other to thrash out the broad outlines of the deal.
On October 12 2023, a Nocma delegation from its operations department negotiated pipeline transportation terms and conditions with Noic counterparts in Zimbabwe, leading to the draft transportation contract, Reuben said.
“Nocma is currently prospecting for volumes to be transported through the pipeline to Feruka,” he said.
Malawi will be pumping its fuel out of Zimbabwe’s Feruka in Mutare and Msasa in Harare, which Reuben said will be cheaper than hauling oil products by road all the way from Beira.
“Analysis shows that at the negotiated transport rate of $20 [K23 600]/cube to Feruka and $33 [K38 940]/cube to Msasa plus the road transport rate from the two locations, the landed cost will be slightly lower than the landed cost by road transportation from Beira to Malawi,” he said.
Landed costs, along with global oil price movements and the Malawi kwacha exchange rates, have an influential role in the buildup of pump prices.
But Feruka and Msasa locations are also a safety valve as they provide alternative supply routes in the event of a catastrophe or any disruptions on the Beira-Malawi route.
Beira has in recent years suffered climate-change related disruptions, including cyclones Idai and Freddy that crippled port operations in Beira and hit fuel supplies in Malawi.
Apart from being cheaper than any other mode of transportation, the pipeline also allows Malawi to move its fuel in bulk and cut operational losses.
Nocma is targeting to move five million litres (5 000 cubic metres) per month, but depending on CPMZ’s performance, there is room for scale-ups, said Reuben.
CPMZ’s Beira-Feruka pipeline, which supplies 90 percent of Zimbabwe’s oil, boasts an annual throughput of 2.19 billion litres.
Recent upgrades are set to boost installed capacity to three billion litres by the end of this year and 4.9 billion litres in 2025, according to CPMZ News.
In starting to use the Mozambique-Zimbabwe pipeline, Malawi could also be building momentum towards its own oil products pipeline that Secretary for Energy Alfonso Chikuni said in a recent interview is under serious consideration by Capital Hill.
Malawi has for decades tried to establish its own pipeline and to that end, commissioned a feasibility study of a fuel channel from Beira to Nsanje.
The study, published in 2008, showed that such a pipeline would be viable, especially under a build, operate and transfer arrangement.
At the time, it was estimated that the pipeline project would require about $150 million (about K177 billion) to lay the pipeline and construct fuel storage facilities.
Chikuni said his ministry is working to actualise the dream of fuel reaching Malawi’s borders through pipeline.