Pipeline construction in Zambia

A Zambian firm, Basali Ba Liseli Resources (BBLR) is to construct a $1.5 billion oil pipeline from New Lobito Oil Refinery in Angola to  Kapiri Mposhi in Zambia to provide a reliable and sustainable supply of  finished petroleum products.

BBLR plans to work with the governments of Angola and Zambia  in this project with collaboration of financing institutions and strategic technical partners in initially constructing a 2 000 km pipeline from the oil refinery in Lobito to Kapiri Mpshi to transport a minimum of 25 000 barrels daily of refined petroleum products (12.5 percent  of the proposed refinery’s capacity).

The principal objective is to transport a minimum of 25 000 barrels per day or 3 972 750 litres per day of refined petroleum products for purposes of distribution within Zambia and other countries like the DRC and Malawi in the region. Zambia currently consumes 2 500 000 litres on a daily basis , meaning that the balance  1 472 750 litres will go into reserves, and into fulfilling off-take agreements with neighbouring countries.

In early 2009, the government of Angola commenced the construction of a new refinery at a cost of  $8 billion that would produce  200 000 barrels per day  of refined petroleum products including petrol and kerosene, among others.

It is envisaged that the refinery being constructed at the Port of Lobito  would be commissioned by the end of 2013.

90 percent of the production would be consumed domestically and within the SADC region with the balance of 10 percent being exported to countries outside the region, according to the Angolan Ministry of Oil.

BBLR’s goal was to contribute to the enhancement of Zambia’s energy sector, in particular, and of the region in general.

“This is in full recognition of the unavoidable imperativeness of energy to national survival as well as to socio-economic activities. We realize that to attain and sustain this goal, there is need to identify an efficient, secure and sustainable formula to deliver petroleum products to the final users,” observed BBLR director Wamulume Kalabo.

“BBLR wishes to work with the governments of Angola and Zambia as equity partners from the onset, with a riding Build Operate and Transfer (BOT) arrangement for a specific period. While BBLR’s main motivation is income, the motivations of the governments of Angola and Zambia will be to enhance the business and investment climate in the two countries and the region, through the relative reduction in the pump price of the petroleum products and to reduce energy import bill for Zambia and other beneficiary countries, and hence free resources to funding other activities like social infrastructure, education and healthcare,” he elaborated.

Other intended motivations of the two governments would be to enhance energy security through possible creation of adequate reserves and to enhance regional integration and security through the co-ownership, co-management and co-operation to be created by the project, and to enhance the government’s revenue through profits from the business.

Global Industrial Solutions Incorporated of China has been identified as the EPC partner, meaning that they will design, procure and construct and upon completion will operate the pipeline under BOT arrangement for a period of time and then hand over to BBLR. The two governments will not put in any money but will become shareholders in order to facilitate the securing   of letters of comfort.

Following the conclusion of the MoU and project structuring during the first quarter of this year, a comprehensive study will be in place by the end of September 2010 while financing arrangement is being targeted for March 2011.

Construction works of the pipeline are expected to commence by September 2011 with commissioning of pipeline operations scheduled by 2016.

“If all would-be equity partners will understand the necessity of the project from the onset, the project preparation timelines from MoU  to commencement can be reduced by more than half and the support required will be mainly  the political will from both  states by way of conceptual buy-in,” Kalabo said.