Tanzania to boost fuel storage capacity, aiming for stability and savings

Tanzania is gearing up for a significant expansion of its petroleum product storage facilities, aiming to address growing demand and ensure fuel security in the face of volatile global prices.

The Petroleum Bulk Procurement Agency (PBPA) announced plans for a major warehouse expansion project, driven by the current capacity struggling to keep pace with the country's rising fuel consumption.

 The existing infrastructure, built when fuel imports were significantly lower, is causing delays in offloading at the Dar es Salaam port, impacting efficiency and supply chains.

The PBPA executive director, Mr Erasto Simon, told editors in Dar es Salaam yesterday that the absence of a large storage facility has been causing ships to take a long time to offload fuel at the Dar es Salaam port.

He said that a contract for the construction of a huge warehouse will be signed later this month.

“The existing infrastructure has been in use since the establishment of BPS, when the amount of fuel being imported per month was an average of 200,000 to 250,000 tonnes,” he said.

He said currently, the amount of fuel imported per month stands at an average of 450,000 to 600,000 tonnes.

He said the Tanzania Ports Authority (TPA) has approved the procedures to find a contractor who will improve and expand the storage facility in Dar es Salaam.

According to Mr Simon, Tanzania has 22 warehouses that have the capacity to receive approximately 1.31 billion litres of four types of petroleum products (diesel, gasoline, jet fuel, and kerosene);

The facilities are located at Kurasini in Dar es Salaam, which has 11 warehouses with the capacity to receive approximately 570 million litres, and eight other warehouses in the Kigamboni area, with the capacity to receive a total of approximately 522 million litres.

Others are located in Mtwara (935 million litres) and Tanga (182 million litres).

He said the shortage of the US dollar was another issue affecting the importation of petroleum products. He said that the Ministry of Energy, in collaboration with the Ministry of Finance and the Central Bank, could reduce the severity of the shortage.

On the other side, he said that through fuel import agreements, the agency uses the market price assessment made by the S&P Global Company, which is used by East and Southern African countries to obtain an assessment of the oil price in the world market.

S&P Global is the only oil market price evaluation company with offices around the world and a presence in Africa.

In another development, Mr Simon said that through the BPS, there have been various benefits, including ensur-ing the availability of fuel that meets the country’s needs and the required quality standards.

Another benefit, he said, was a relief in the costs of transporting fuel, as joint imports tend to minimise costs. More than $200 million, equivalent to Sh500 billion, is saved every year through the BPS system.

He further noted that there have been reductions in fuel prices due to efficient imports, increased tax revenue from oil products, reduction of tax evasion and other forms of fraud that were being done by oil marketing companies, control of fraud in oil prices in the world market, and reduction of oil import costs.

Other benefits include a reduction in ship congestion at the port. “In this, an average of $170 million, equal to Sh425 billion, is saved every year compared to the demurrage costs that were paid before the BPS system,” he said.

He named other benefits as the system being used by neighbouring countries for the purchase of fuel, thus providing the government with revenues due to the increase in the number of port users.

“Currently, fuel imports for neighbouring countries have reached an average of 55 percent of the amount of fuel imported through BPS from an average of 33 percent previously; reduction of fuel loss when offloading fuel from ships, where an average of 1100 tonnes (equivalent to 1,300,000 litres) is saved every month, equal to approximately Sh4.16 billion at the price limit of December 2023.

Thus, approximately Sh49.9 billion is saved annually,” he said.