New drive to cut fuel costs

Petroleum Importers Limited (PIL) has started importing fuel by rail from Nacala Port in Mozambique in a move that is expected to reduce the commodity’s landed cost when the capacity increases.

In the same vein, State-owned National Oil Company of Malawi (Nocma) Limited said it will start importing fuel by rail from September after completing its K4.6 billion project to connect its Lilongwe and Blantyre strategic fuel reserves to railway lines.

In an interview on Tuesday at Total Energies Malawi Limited Limbe depot during the delivery of the first 500 000 litres of fuel, PIL general manager Martin Msimuko said they believe rail transport is a solution for fuel transportation in Malawi to reduce the landed cost.

He said: “Bringing fuel by rail has several advantages, including low cost of transport as it can bring more wagons at once with less loss. We save about 15 percent when we compare rail to road transport.

“Our aim is to bring 20 percent of the product by rail as mandated by the Malawi Energy Regulatory Authority [Mera], but at the moment we are at 15 percent and hope to meet the set target within two years.”

PIL is a consortium of private oil marketing companies, namely Petroda (Malawi) Limited, Puma Energy, Total Energies and Vivo Energy.

In a separate interview yesterday, Nocma deputy chief executive officer Helen Buluma said when in full utilisation, they will bring in a minimum of 1.2 million litres of fuel daily or an average of 24 million litres per month via rail.

In a written response, she said: “This would significantly reduce the landed cost of fuel and thereby contribute to a reduction of fuel cost at the pump.”

Buluma said Nocma has 23 million litres of fuel stock in Nacala awaiting to be lifted via rail under the current supply contracts.

The National Energy Policy stipulates that by 2022, 30 percent of fuel should be imported by road through Dar es Salaam Corridor in Tanzania, 50 percent by road from Beira in Mozambique and 20 percent by rail through the Nacala Corridor subject to review by Mera.

In his reaction to the developments, Chartered Institute of Logistics and Transport resource personnel Louis Uko said while the move was a step towards ensuring that fuel as a strategic commodity uses efficient means of transport, the significance of the same on fuel cost could be minimal.

He said: “In an ideal situation, an 80-20 arrangement would be preferable. However, for a start, the current arrangement is still commendable and an indication that as a country we are moving towards the right direction.”

Nacala Logistics commercial and marketing manager Kennedy Kwerani said the company, formerly Central East African Railways, has capacity to bring in fuel using rail. 

He said: “The 20 percent legal requirement set by Mera is just about 120 000 tonnes per year which is less as the country is consuming 600 000 tonnes per year. If we transport only 120 000, we still leave ourselves with a big issue of costs.

“We may not have all the resources needed to transport all we want to, but we have already started. We have a total of 56 tankers with a capacity of 42 000 tonnes.”

Mera consumer affairs and public relations manager Fitina Khonje has since commended PIL and Nocma for the initiatives, saying: “We recognise the positive response that licensees in the energy sector have demonstrated to improve fuel haulage by rail and improve the route mix performance.” 

Nacala Logistics figures show that it costs an average of $0.06 (K49) to $0.08 (K66) per tonne per kilometre to transport goods by rail while freight or road transport costs $0.10 (K82) to $0.12 (K98) per tonne per kilometre.