Zambia has asked Russia’s LUKOIL to procure 90,000 tonnes of emergency crude oil supplies worth $65 million to avert imminent fuel shortages, Finance Minister Ng’andu Magande said on Monday.
Magande said the government had contracted the company’s trading arm, Swiss-based LUKOIL International Trading and Supply Company (Litasco), to purchase the oil following a dispute with France’s Total over fuel pricing.
Total stopped importing crude oil for Zambia owing to the dispute, Magande said, adding that the abrupt halt had been part of the cause of severe fuel shortages experienced in the southern African country early this month.
He said Total, which owns half of the Indeni Oil Refinery, with the balance held by government, has been purchasing oil for Zambia since 2002.
Magande said the government had floated an international tender for a permanent supplier of crude oil to Zambia and that bids would close on Nov. 16 while negotiations with a successful bidder would end by Jan. 1 next year.
“What happened was unexpected… in May Total wanted to increase the price of fuel by 25 percent but we (the government) refused. Then they just told us that they (would) no longer buy crude oil for us and we were in a crisis,” he told a news conference.
“As government, we have gone to the Bank of Zambia (BoZ) to buy foreign currency for the import of 90,000 tonnes of oil and it must be here for processing by 10 November 2007,” Magande said, adding the government would pay Litasco directly.
Magande said Litasco would import the fuel on ad hoc status until Zambia found a permanent supplier.
He said the government was treating oil procurement as an ‘urgent’ matter, to avoid harming economic growth.
“If it means stopping (the building of) some clinics somewhere we will do that to make sure that we have oil,” Magande said.
Total officials were not immediately available for comment.
Zambia’s daily fuel consumption includes 1.5 million litres of diesel, which is used mainly in the copper and cobalt mines, and 500,000 tonnes of petrol.
Magande said Zambia’s fuel shortages this month were compounded by the refusal by an American bank to finance its recent purchase of 60,000 tonnes of crude oil because the source of the oil was Iran, which is facing a U.S. financing embargo.
Magande said Zambian President Levy Mwanawasa had intervened to source funds from a local commercial bank, drawing criticism from the opposition and analysts.
“Foreign-owned commercial banks don’t make decisions here and the only way of dealing with the matter was to speak to our local banks. There is no way we could have left the shortages to continue,” Magande said in response to criticism reported by local newspapers.