Botswana Oil chickens out

Botswana Oil Limited, the government-owned petroleum company, has chosen not to take Botswana Energy Regulatory Authority (BERA) to court over the decision to turn down its application for exclusive import licence, its Chief Executive has disclosed.

In fact, the Willie Mokgatle-led institution has chosen the most diplomatic way of engaging with government on the matter, in a bid to find a harmonious solution. In an exclusive interview on Tuesday, Mokgatle, who is an old hand in the petroleum industry, said government, through the minerals resources, green technology and energy ministry has taken a decision to find solutions to issues related to the rejection of the licence by BERA.

According to the former Shell Botswana boss, the discussions will also ensure the two entities (Botswana Oil and BERA) who are from the same ministry avoid locking horns in a court of law. “I believe in the coming months a solution will be found,” said the optimistic Mokgatle.

BERA, the petroleum and gas regulator has given Botswana Oil  thumps down, after the latter applied to be the sole importer of petroleum and related services in Botswana, citing several factors.
The verdict, which was delivered by BERA Chairperson Bernard Ndove, keeps the status quo, which permits multinational companies in the sector such as Puma, Engen and Shell to participate in importing petroleum and petroleum products into the country.

The regulator is clear on its decision to deny Botswana Oil such exclusive licence. “Botswana Oil has not submitted a business case in support of the proposed changes in the current arrangements for importation of petroleum and petroleum products in the country, therefore making it difficult to assess the costs and benefits of the proposal,” said the authority in its 8th May 2018 decision. Accordingly, it is this failure by Botswana Oil not to state their financial readiness, that they are capable of being the sole importer, and with the absence of this information, the application is based on speculation, said BERA. By law, any application for this licence, Botswana Oil included, is supposed to provide evidence of their financial capability, but such information was not provided when the application was lodged.

Speaking to Botswana Guardian at the upmarket Rooms 52 hotel, Mokgatle indicated that, Botswana Oil is financially-ready to become the only importer of petroleum products in Botswana. He said, for every litre of petroleum products purchased by consumers, Botswana Oil is entitled to 17, 5 thebe. This allows the Gaborone-based company to go into the open market to raise cash if the need arises.

Mokgatle also revealed that the company, which has been registered privately, has also agreed with Omani Trading International to supply it with petroleum products on a credit basis. “This is a done deal (referring to the Omani),” he said confidently. Omani Trading is an Oman company which specialises in selling, marketing and supplying crude oil.  Botswana Oil, which was established in 2013 applied for the licence last month.

Subsequently a hearing was convened which was attended by various stakeholders, being players in the oil industry, experts, the public and business associations among others. The other reason for the rejection is that at the time of lodging the application, Botswana Oil was still negotiating with various stakeholders for agreements and contracts for oil supply. This did not put Botswana Oil in any good stead since their submission meant that their capacity is dependent on being given the exclusive licence, added BERA. “However, the requirement of Section 39(2) (d) is that at the time of application one must have capacity. A demonstration of capacity is a prerequisite of the issuance of the licence,” said Ndove. Botswana Oil does not have sufficient storage capacity to secure 60 days of uninterrupted supply, said Ndove.

“Contrary to the submissions made by the applicant, government’s planned petroleum products storage programme clearly indicates that the construction of the Tshele Hills project, expansion of the Francistown depot and development of the new storage depot will only fulfill the 60 days stock cover by the year 2020,” explained BERA.  As things stand, the domestic market consumes 1, 2 billion of litres of petroleum products on an annual basis, which amounts to 100 million litres of consumption per month, said the Botswana Oil CEO. 

Once granted an exclusive licence, Botswana Oil will be coming with an additional capacity of 10 million litres which will add to an already existing capacity of 20 million litres which is the combined capacity of all top five oil operating companies in Botswana, said Mokgatle. He said that they are willing to start with importing 50 percent of the total requirements of petroleum products in Botswana, before gradually moving to 100 percent. However, BERA has refused to accede to this proposal, arguing that once the licence is granted it will immediately exclude other players from importing.