By Seleoe Nonyane
The ministry of energy in collaboration with the Petroleum Fund hosted the Southern African Customs Union (SACU) Interstate Oil Committee (IOC) meeting in Lesotho this week to discuss oil industry issues among member states.
These include the Basic Fuel Price (BFP) as all the SACU member states source fuel at the same place, hence the feeling that prices need to be uniform among member states.
However, this is not always the case as rates affect prices in line with the strength of each country’s currency.
Another issue discussed was fuel storage as all the member states are expected to have the National Fuel Storage Facility as each country’s mandate is to ensure a sufficient fuel supply among the SACU member states.
The availability of the storage ensures storing sufficient fuel just in case suppliers encounter problems.
Speaking at the opening of the two-day meeting, the minister of energy, Nqosa Mahao, indicated that lately, these meetings have amplified what the petroleum industry is experiencing on prices, which continue to increase month after month.
Mahao said the meeting should explore ways of addressing this challenge.
He indicated that the price of crude oil has been over USD80 per barrel for some time and that has resulted in huge price hikes in general in the SACU region; this is worsened by the Russia-Ukraine conflict and now the Israel-Palestine war.
“Before the dawn of the Covid-19 pandemic and the Russia-Ukraine conflict, for instance, the price of a litre of petrol was almost half of what it is today.
“Indications are that fuel prices will remain high for the foreseeable future. It therefore calls for all of us to engage seriously as a region, to explore ways of mitigating impacts thereof,” Mahao noted.
He said the Russia-Ukraine has taught that the world is no longer the same and the normal price cushioning mechanisms are no longer adequate and other mechanisms have to be explored.
In Lesotho, the government is thinking of setting up a stabilisation fund to assist consumers in times of crisis in the securing petroleum products such as now, he revealed.
He added that Lesotho, like other SACU member states, is convinced that for the secure supply of these products, construction of a strategic fuel facility is key.
A feasibility study has been conducted which has identified three sites for the construction of a 60-day facility.
At the same occasion, Puma Energy chief executive officer Stephane Neutsha noted that according to the World Bank, the Gross Domestic Product of Lesotho is the lowest in the region.
Neutsha said this means that when doing business in Lesotho the purchasing power of Basotho needs to be considered as it is not at the same level as other parts of the region.
He mentioned that Lesotho imports products from two main locations in South Africa, in the Johannesburg area where they have some refineries and in Durban. a small volume is coming from Matola in Mozambique.
“One of the challenges facing this industry is the weakening supply of South African refineries, and this is critical as Lesotho only imports from South Africa.
“Therefore, if South Africa is weakening in terms of the refining as the net importer of fuel then Lesotho will suffer. The second key issue is the misalignment between the BFP of South Africa and Lesotho.
“If Lesotho buys fuel from South Africa and their BFP’s are not aligned then there is a problem. The third issue is the integration of Matola into the BFP of Lesotho. Matola has a different market on its own and if Lesotho starts having an issue with securing fuel from South Africa Lesotho will have to look at alternative markets and that is Matola,” Neutsha added.
