COMMON MARKET FOR EASTERN AND SOUTHERN AFRICA (COMESA) Annex VII REGIONAL ASSOCIATION OF ENERGY REGULATORS FOR EASTERN AND SOUTHERN AFRICA (RAERESA) REPORT ON THE STATUS OF ACCESS TO AND AFFORDABILITY OF OILAND GAS September, 2014 1 P a g e
CONTENTS I. INTRODUCTION... 3 II. FINDINGS... 3 II.1. Country General Information... 4 II.2. Legal and Regulatory Framework... 5 II.3. Oil and Gas Availability (Reserve, from Refinery & Import)... 6 II.4. Oil and Gas Infrastructures (Storage Facilities, Refineries, Pipelines)... 8 II.5. Projects / Programs (ongoing, in pipeline) on Oil & Gas... 10 II.6. Factors affecting Oil & Gas Accessibility... 11 II.7. Factors affecting Oil & Gas Affordability... 11 II.8. Mitigation measures on Oil & Gas accessibility and affordability... 12 III. CONCLUSION & RECOMMENDATION... 13 2 P a g e
THE STATUS OF ACCESS TO AND AFFORDABILITY OF OIL AND GAS - 2014 I. INTRODUCTION Following the third Meeting of the Portfolio Committee on Oil and Gas of the Regional Association of Energy Regulators for Eastern and Southern Africa (RAERESA) that was held in Kigali, Rwanda, September, 2013 with the aim of facilitating the implementation of RAERESA s work programme, whereby the Committee discussed among other reports, the draft report on the status of the accessibility and affordability of Oil & Gas, the meeting winded up by requesting countries that have not availed their data to submit them to Rwanda for further updating the report. The report on the status of access to and affordability of oil and gas is in accordance with pillar three of the joint RAERESA Work Programme (2013-2015) with a general objective of facilitating the development of recommendations on issues affecting the economic efficiency of energy interconnections and energy trade among members. The specific objective of the access and affordability survey through questionnaires was to get updated information on the status of accessibility and affordability of Oil and Gas among the member countries of the Regional Association of Energy Regulators for Eastern and Southern Africa (RAERESA). The method used to gather information is a user-friendly questionnaire comprising of six sections; the first section deals with country s general information, the second section focuses on legal & regulatory framework and the last four sections deal with the availability, accessibility, affordability data and the associated challenges encountered in Oil and Gas industry as well as the proposed solutions. The Questionnaire is attached to this Report as Annex I. The present updated report contains data and information on status of Oil & Gas accessibility and affordability with respect to nine countries namely Rwanda, Kenya, Seychelles, Democratic Republic of Congo (DRC), Madagascar, Ethiopia, Comoros, Sudan and Malawi. II. FINDINGS This report compiles key information gathered from the above nine countries mainly on Oil & Gas availability, accessibility as well as affordability by the population of these nations. 3 P a g e
Item II.1. Country General Information Information per country RWANDA MADAGASCAR ETHIOPIA Democratic Republic of Congo (DRC) Area 26,798 km 2 587,040 km 2 1,104,300 km 2 2,345,442km 2 580,367 km 2 455 km 2 2,234km 2 1,882,000 Km 2 118,480 km 2 Population 11,370,425 (year 2011) 20,750,000 (year 2009) 86,000,000 (year 2012) 72,784,000 38,610,097 (year, 2009) 87,400 (year 2010) 743,797 (Year 2013) 38,000,000 (Year 2010) 15,000,000 (Year 2010) Population density 424/km 2 35/km 2 70/km 2 31/km 2 66/km 2 192/km 2 333/km 2 20/km 2 127/km 2 Institutions involved in Oil & Gas Sector Trade and Industry Rwanda Bureau of Standards (RBS) Rwanda Utilities Regulatory Authority (RURA) Oil Marketing Companies RDB (Rwanda Development Board) Infrastructure (MININFRA) Energy, Water and Sanitation Authority (EWSA) Oil marketing companies Ministry IN Charge of Strategic Resources MADAGAS CAR Oil Malagasy Office of Hydrocarb ons (OMH) Trade. Oil Marketing Companies Water, Irrigation & Energy. Oil Marketing Companies SEP- CONGO Hydrocarb ons COHYDRO Energy Energy Regulatory Commission (ERC) Oil Marketing Companies NOCK (National Oil Corporation of Kenya) KPC(Kenya Pipeline Company) KPRL(Kenya Refinery Limited) KBS (Kenya Bureau of Standards) Seychelles Company The Comorian society of Hydrocarbons SCH The Geological Bureau of Comoros (BGC) is the body that control and regulate Operations. ; Oil Marketing Companies ERA, Water Resources and Electricity, Oil Marketing Companies Malawi Energy Regulatory Authority (MERA) Energy Department of Energy Affairs 4 P a g e
Country General Information Fig.-1: General information (Area & Population) II.2. Legal and Regulatory Framework Based on gathered information, various regulatory mechanisms and tools are adopted by different countries as indicated in the table below. Information per country RWANDA MADAGASCAR ETHIOPIA Democratic Republic of Congo (DRC) Downstream Law; LPG Regulations, 2012; Aboveground Storage Facilities Decree n 2004-670 of 29 June 2004 setting up the rules and responsibilities of the Office of Hydrocarbons in Madagascar; Decree n 1317/2006 / MEM / OMH 30 National Reserve Depots Administration Proclamation Number 82/1977: Order on the attributions on the powers of the Ministry of Hydrocarbons and implementing measures to manage the sector by Decrees; Bulk Joint Procuremen t of Products; Minimum Operations Stock Regulations Government Policy which controls & LPG Price; Pricing regulations Decree No. 13-017 / PR, promulgating the Law No. 12-019 / AU of 27 December 2012 on the oil code in Comoros. Law No. -80 to 27 created in 1981 on the approval of status of the hydrocarbon company of Comoros Sudan Law on Production of Oil Taxation of Agreement Oil Wealth Law Energy regulation Act 2004 Liquid Fuels and Gas (Supply & Production)Act 2004 & Regulations 2009 Exploration and 5 P a g e
Regulations, 2012; Draft Regulations for Petrol Service Regulations; Rwanda LPG & Downstream petroleum products standards; January 2006 regulating the construction and operation of petroleum service stations; Decree n 8583/12 of 3 May setting up specifications for the Gas-oil and authorizing the marketing of the product in the country; Law No. 2004-003, (24 th / 06/2004) regulating activities of Downstream -Contract Framework -Law No.81-013 /02nd/April 1981; Order No.020 CAB / MIN ENER / 2006 Order No. 059 CAB / MIN / ENR pricing regulations Importation of Products (Quotation allocation) Regulations Levy Regulations Gasohol Blending Regulations as the body that controls and regulates imports signed by the president of the republic; Minister of Finance order of setting up prices and other internal regulations; Production Act 1982 National Energy Policy 2003 II.3. Oil and Gas Availability (Reserves from refinery & importation) The availability of Oil & Gas in the nine countries is evaluated in terms of natural reserves, products from refineries where applicable and importation of crude or refined products (light & heavy fuel oil). Information per country Item RWANDA MADAGASCAR ETHIOPIA Democratic Republic of Congo (DRC) 201,035,344 (liters Fuel Oil) 660, 426,000 (liters of fuel oil) 2,035,265,000 (liters of fuel oil) 888,485,000 (liters of fuel oil) 3,623,400,000 (liters of fuel oil) Fuel oil: No data provided 70,475539 ((liters of fuel oil) 4,896,071,000 ((liters of fuel oil) Per Capita 17.7lit/year 31.8lit/year 23.6lit/year 12.2lit/year 93.8lit/year 94.75lit/year 128.8lit/ year 23lit/year 355,270,000 ((liters of fuel oil) LPG 604,751 kg (LPG) 5, 952,000 Kg LPG 8643 TOE LPG (7,202,500 kg) LPG 900,000kg LPG 87,400,000 kg (LPG), 411,000 kg LPG 286,233 kg. LPG 367,914,000 kg LPG 658,000 kg LPG 6 P a g e
Per Capita 0.53kg/year 0.28kg/year 0.012kg/year 0.23kg/year 4.7kg/year 0.38KGyear 9.7kg/year 0.04kg/year Remarks Importation of Year 2010 Importation of Year 2010 Importation of Year 2010 Importation of Year 2010 From Refineries and Importation of Year 2010 Importatio n of Year 2010 Importation of Year 2010 From Refineries and Importation of Year 2010 Importation of Year 2010 Kenya and Sudan have refineries for crude oil processing in addition to imported petroleum products, while Rwanda, Ethiopia, Seychelles, Madagascar,Comoros and Malawi rely on importation only and Congo has an opportunity on crude oil export. Currently DRC is on its research phase that forecasts the availability of huge quantities of methane gas estimated to 50 billion of m 3 (exploitable reserves) and on Rwanda side estimated to 55 billion of m 3. Products & LPG Availability Fig.-2: Availability of LPG & other Products 7 P a g e
II.4. Oil and Gas Infrastructure (Storage Facilities, Refineries, Pipelines) The table below indicates different petroleum infrastructure available for storing, processing or transporting oil and gas, as means that facilitates oil and gas accessibility. RWANDA MADAGASCAR ETHIOPIA Democratic Republic of Congo (DRC) LPG is stored by Private companies in Bulk Tanks in open air and Cylinders by LPG Retailers; Total Capacity of LPG Storage Facilities is 135 m 3 ; Strategic (Diesel, Gasoil, kerosene) Stocks owned by the Government and other commercial oil depots by Private Oil Marketing Companies are installed in open air; Total Capacity of Oil Storage Facilities is 30,000 m 3 ; Underground Storage Tanks LPG is stored in Bulk Tanks in open air and Cylinders by LPG Retailers; Total capacity of LPG storage facilities is 3,320 m 3 (Marketing Terminals: 2,400 m 3 and National Strategic Storage: 560 m 3 ); Oil Storage Facilities are installed both in open air and underground; Storage Facilities both are Horizontal and vertical; Total Capacity of Oil Storage Facilities is 205,000m 3 (Marketing Terminals 172,000 m 3 & National Strategic Storage 33,000m 3 There are Government & Private storage facilities; Oil Storage Tanks are erected abovegroun d; Total Capacity of Oil Storage Facilities is 369,800m 3 ; LPG is stored in Bulk Tanks in open air and Cylinders by LPG Retailers; Oil Storage Facilities are installed in open air; Total storage capacity of oil is 345,590m³; Information per country Bulk Tanks are in open air, and Cylinders by LPG Retailers; 6,038,000 m 3 (Marketing terminals); 1,200,000 m 3 (Refineries) Bulk tanks are in open air; Underground tanks are only retails outlets; Capacity of facilities is 1,397,548 m 3 (Marketing terminals) & 550,950 m 3 (strategic stock); Oil pipelines Bulk tanks are in open air; LPG is sold in Cylinders by Retailers; All storage facilities are owned by the Government; Total LPG Storage capacity of 13,733 m 3 No data provided Storage facilities owned by the Government (13,733 m 3 ) Spherical tanks for LPG storage LPG Cylinders for Industrial usage Marketing terminals (36,860 m 3 ), National strategic stocks (48,510m 3 ); Private storage facilities (12,000m 3 ) Total (97,370 m 3 ) Storage facilities are :Fixed, Floating and Screen-floating roof Tanks Marketing terminals (404,158 m 3 ) National Strategic Stocks (463,463m3) Oil pipelines LPG is sold in Cylinders by Retailers; Capacity of facilities is 14,200 m 3 (Private terminals) & 1,500 m 3 (strategic stock); 8 P a g e
(UST) are installed at Petrol Service/Filling Stations; ); No refinery facility No refinery facility No refinery facility Crude oil facilities available but no refinery Crude oil refinery facility available No refinery facility Crude oil refinery facility available No refinery facility The presence of refinery facilities is one of the important elements in oil & gas cost reduction, and the countries that have these infrastructures do not need to import huge quantities of refined products. Storage facilities ( Products & LPG) Fig.3: Available storage facilities capacity 9 P a g e
II.5. Projects / Programs (ongoing and in pipeline) on Oil & Gas Information per country RWANDA MADAGASCAR ETHIOPIA Democratic Republic of Congo (DRC) Development of the Management Information System (PMIS) by the Ministry of Trade and Industry; New projects of construction of Storage Facilities of a capacity from 30 million litters to 150 million liters by 2017; There are plans to extend the Nairobi Eldoret pipeline to Kampala and Kigali with atripartite initiative between Rwanda, Uganda, Kenya. Tax waiver (VTA, Import tax) on LPG Constructio n of oil pipeline from Tsimiroro to the coast; Ongoing projects on exploratio n of oil & Gas Awareness of population on the use of modern household energy and fight against the use of wood fuels. This is being enhanced by the Ministry of Energy and Hydrocarbons through following Organizations / Companies: COHYDRO; Commercial companies of the group of Professional Distribution of petroleum product (GPDPP) Code of Hydrocarbons Pre-Feasibility Study on Exploration of Oil & Gas Project of construction of Refineries Zero rated duties on LPG, Construction of LPG 14,000 MT common user facility with the objectives of Affordability, Cost reduction of import & improved availability; Proposed construction of inland bulk and cylinder filling facility with objective of reducing cylinder handling cost, improved access; Standardised valve & cylinder capacity to improve exchageability and price competition Proposed joint bulk procurement to improve the freight; Construction of strategic stock reserves + facilities (product availability & price stability) Exchange of kerosene stove for a gas stove and SCR 50 for a 4.5kg LPG cylinder; Phase out the use of kerosene stoves. The program achieved almost 100% replacement of kerosene stove; The country began prospective studies ; Malawi Government has initiated the project of installing Strategic Fuel Stocks of 60 million liters Project of construction of pipelines 10 P a g e
II.6. Factors affecting Oil & Gas Accessibility Following are the factors affecting the Oil & Gas accessibility despite efforts being initiated by RAERESA member countries. Information per country RWANDA MADAGASCAR ETHIOPIA Democratic Republic of Congo (DRC) High importation costs on Products (Gasoline, Diesel, Kerosene ) as the country is landlocked; High price of LPG, cylinders and other accessories; Dependable Distribution network; Inadequate supply of both LPG and other products; Public awareness on the benefit of LPG usage; Dependable Distribution network; Adequate supply of both LPG and other products; Dependable distribution network; High cost of LPG accessories Dependable distribution network Equipment cost Availability of supply-shortage of oil products Pricing policy Insufisance storage infrastructure, The Country buys finished products directly from outside Adequate supply of both LPG and other products; High importation cost Problem of Proximity of retail Outlets II.7. Factors affecting Oil & Gas Affordability The information provided by regulators from RAERESA, proved that, challenges are encountered with respect to the Oil & Gas affordability as shown in the table below: 11 P a g e
Information per country RWANDA MADAGASCAR ETHIOPIA Democratic Republic of Congo (DRC) Affordability by medium class population due to high LPG price and cylinders; LPG end user price is higher due to associated importation cost and the cost of purchasing the empty cylinders; Unavailability of LPG filling regulators that dictates the consumers to refill their cylinders at the same service provider thus limiting the market competition; Location of service stations of LPG and Petrol; Low Income of consumers; Profit margin of products sellers (service stations); Public awarenes s on the benefits of LPG usage; Internati onal Gas & Oil Prices; Dependable Distribution network; Transport from the supplying points associated with the large national territory; Higher refilling price for LPG; Low income of population; Affordability of equipment and accessories price; The Government has removed subsidy on LPG for industrial and commercial sector, while Domestic is still subsidized; Pricing policy; High import cost high taxes No competition on the market; Products price is very high (Diesel:1.514US D/Lit; Gasoline : 1.785 USD/ Lit; Kerosene: 1.428 USD/Lt Adequate supply of both LPG and other products; High importation cost II.8. Mitigation measures on Oil & Gas accessibility and affordability For the purpose of improving social welfare of their population as well as promoting investment in the Oil and Gas industry, RAERESA member countries have been exploring various ways or programs to adopt in order to move on with good trend in this energy sub-sector. The table below indicates some mitigation measures with regards to the Oil & Gas accessibility. RWANDA MADAGASCAR ETHIOPIA Democratic Republic of Congo (DRC) Case of Diesel and Heavy Fuel Oil used by the thermal power plant, there is a cross subsidy of 30% by the Government; Initiative from the tripartite of Rwanda, Uganda and Kenya with Construction of oil pipeline from Tsimiroro to the coast; Projects on Exploration of oil & Gas Awareness of population on the use of modern household energy and fight against the use of wood fuels. This is being enhanced by the Ministry of Energy and Hydrocarbons Information per country Subsidizing Kerosene by premium motor spirit (KES 2.00 by 0.94 KES); LPG- Duty free; Kerosene duty free, margin cross subsidized by Gasoline (MPS) Construction of inland bulk & cylinder filling Phase out the use of kerosene stoves and Exchange of Kerosene stoves for gas stoves. The country began prospective studies ; Subsidizing Illuminating Kerosene Initiated project of installing Strategic Fuel Stocks of 60 million liters Revision of margins of market players for them to invest 12 P a g e
regard to the construction of oil pipeline from Kenya to Kigali Via Kampala Tax waiver (VTA, Import tax)on LPG New projects (already started) of constructing petroleum depots facility; Standardize Gas cylinders and their valves to improve exchangeability; Joint bulk procurement system; Construction of 14,000 MT LPG common user storage facility further Government adopted an Authomatic Pricing Mechanism in 2012 determined vy international prices and exchange rate with a trigger percentage of at least 5% Summary Table on Oil & Gas Rwanda Madagascar Ethiopia DRC Kenya Seychells Comoros Sudan Malawi Area 26,798 587,040 1,104,300 2,345,442 580,367 455 2234 1,882,000 118,480 Population 11,370,425 20,750,000 86,000,000 72,784,000 38,610,097 87,400 743,797 38,000,000 15,000,000 Population Density 424.30 35.35 77.88 31.03 66.53 192.09 333 20 127 Oil & gas Availability(except LPG), Ltr 201,035,344 660,426,000 2,035,265,000 888,485,000 3,623,400,000 70,475,539 4,896,071,000 355,270,000 Oil & gas Availability(except LPG)- Capita per person per year 17.68 31.83 23.67 12.21 93.85-94.75 128.8 23 LPG Availability, Kg 604,751 5,952,000 7,202,500 900,000 87,400,000 286,233 367,914,000 658,000 LPG Availability- Per Capita per person per year 0.05 0.29 0.084-0.01 2.26-0.38 9.7 0.04 Storage Capacity - Oil & gas(except LPG), Ltrs 30,000,000 205,000,000 369,800,000 345,590,000 1,397,548,000 13,733 868,621,000 15,700,000 Oil & Gas Storage days cover (Except LPG) 54.47 113.30 66.32 141.97 140.78 Storage Capacity LPG, Kg 135,000 3,320,000 7,238,000 97,370,000 - LPG Storage days cover 81.48 203.60 30.23 13 P a g e
III. CONCLUSION & RECOMMENDATIONS Based on findings from the information provided by the six countries out of 19 COMESA member countries; the compiled report provides a general picture of Oil & Gas accessibility and availability for Rwanda, Ethiopia, Kenya, DRC, Madagascar, Seychelles, Comoros, Sudan and Malawi which can contribute to the targeted RAERESA objectives especially on information sharing with respect to Oil and Gas industry. However, for a deep analysis, more information are required considering that some of the requested data are missing and other COMESA countries have not yet reacted on the questionnaire. To efficiently achieving RAERESA work programme and objectives, the following recommendations should be taken into consideration: There should be a new strategy to positively encourage all COMESA member countries to attend RAERESA meetings and therefore actively participate in achieving REARESA objectives; Challenges in responding to RAERESA questionnaires should be communicated to the COMESA Secretariat with copy to the Regulator chairing the concerned portfolio committee The status of implementation of RAERESA work programme should be part of the Agenda of the upcoming portfolio committee meeting. 14 P a g e