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The Ministry of Mines and Energy (MoME) is
negotiating with the Sudanese giant, Nile Petroleum
Co. Ltd (NPC), to grant it fuel blending rights in
accordance with a decision made by the Council of
Ministers to blend and supply ethanol and benzene.
The negotiations are almost complete, sources at the
Ministry told Fortune.
The talks, which began after MoME presented a
Bio-fuel Development and Usage Strategic Document
that envisaged using the country’s rich ethanol
potential, is expected to make Nile Petroleum the
leading stakeholder in the Ethiopian oil energy
market.
A steering committee has been established with
representatives drawn from MoME, the Ministry of
Trade and Industry (MoTI), Ethiopian Petroleum
Enterprise (EPE) and the six oil suppliers to
evaluate the technical and financial feasibility
studies, though the total cost of the project will
be incurred by Nile Petroleum.
“We will cover the entire cost of the project once
the agreement is finalised,” Sharaf E. Babkir,
general manager of the Ethiopian branch of Nile
Petroleum, told Fortune. “The negotiations
are in the closing stages, and we will submit our
final proposal early this week.”
The Ethiopian government chose this company based on
a bilateral relations agreement signed with Sudan
and Nile Petroleum’s capacity.
The Ethiopian branch of Nile Petroleum, a subsidiary
of NPC, has secured a 20,000sqm plot in Sululta,
24Km north of Addis Abeba, in the Oromia Regional
State, for the construction of a fuel depot which
will have a combined capacity of 300tns of Liquid
Petroleum Gas (LPG) and 1,500 cubic metres of
Petroleum.
NPC was established in 1954 as Nile Import and
Trading Oil Company a subsidiary of TOTAL, with the
Sudanese government holding a 75pc stake until 1993.
The company, totally state-owned since 1993, has a
60pc share of the marketing and distribution of
petroleum products in Sudan.
The local branch first obtained a license from the
Ethiopian Investment Agency (EIA) to distribute LPG
and in 2004 it upgraded its license to cover its
planned expansion project.
Endorsing a strategic document, the Ethiopian
government is now focused on exploring the country’s
bio-fuel resources. It stipulates incentive schemes
for sugarcane producers, a major input for ethanol,
in addition to encouraging state-owned enterprises
to use blended oil. Providing incentives for Flex
Fuel Vehicle importers as well as securing finances
for the sector has also been recommended.
To satisfy the total petroleum demands in the
country, Ethiopia annually spends 8.6 billion Br,
87pc of its total foreign trade earnings, and a
serious drain on its limited foreign currency
holdings.
Though the government hopes to switch to alternative
energy sourceS to relieve this burden, some
petroleum supplying companies are sceptical of the
benefit they will get out of this venture.
“Though shifting from benzene to blended oil has its
own advantages, there is doubt as to who is going to
benefit,” the marketing manager of one of these
companies told Fortune. “There are associated
costs like installing new fuelling machineries, and
our benefit should be considered when we are made to
shift to a new service.”
Nile Petroleum currently has four tankers in Sululta;
two for benzene and two for diesel. However, the two
diesel tankers are set to be used for storing
benzene.
“We will also install another two ethanol storage
tankers, which will be increased after three years
given a higher demand,” Sharaf told Fortune.
A veteran expert who for the last 30 years worked in
the petroleum industry, however, warns that the
blending is sensitive as ethanol is prone to
absorbing water.
“Though blending is customary in other countries
too, if water accidentally enters in the early
stages of the process, the project may fail as
people will loose trust in it,” he told Fortune.
“The water makes the ethanol unable to mix with
benzene.”
The necessary supply of the ethanol input is also in
question.
Of the three state-owned sugar factories, Fincha
currently produces eight million litres of ethanol
while the other two - Metehara and Wonji Shoa - do
not produce.
However, as the latter two are under expansion, in
addition to the newly constructed huge Tendaho sugar
factory, it is expected that ethanol supply would
significantly increase, a source at the Ethiopian
Sugar Development Agency (ESDA) told Fortune.
The total ethanol production is expected to reach
35.1 million litres in 2010 when Metehara and Wonji
switch to the production of ethanol rather than
Molasses.
Nile Petroleum also has planned to open its fuelling
stations in Addis Abeba, though its request for
plots is yet to find a response from the
municipality.
“We had requested eight different plots in Addis
Abeba to no avail,” Sharaf disclosed.
The Council of Ministers decided at its regular
meeting in 2004 that the petroleum sector should be
open to domestic and international investors to curb
the distribution problems prevalent in the country.
The sector has since seen a couple of investments,
mostly by Ethiopians, including NOC, YBP and the
Kenyan Kobil.
Nile Petroleum, the latest to have joined the
sector, undertakes petroleum exploration, refining,
storage and marketing in Sudan.
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