The Petroleum Industry in Zambia
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UNCTAD/DITC/CLP/2011/1 THE PETROLEUM INDUSTRY IN ZAMBIA: A study on market structure and competition United Nations Table of Contents 1 EXECUTIVE SUMMARY .................................................................................................................... 1 2 INTRODUCTION ............................................................................................................................... 9 3 OBJECTIVES OF THE REPORT ......................................................................................................... 10 4 ECONOMIC AND SOCIAL CONTEXT AND STRUCTURE OF THE PETROLEUM SECTOR ................... 11 4.1 MACROECONOMIC AND SOCIAL CONTEXT........................................................................... 11 4.1.1 GLOBAL ENERGY PERSPECTIVE........................................................................................ 11 4.1.2 IMPORTANCE OF THE PETROLEUM SECTOR ................................................................... 12 4.1.3 THE CASE OF ZAMBIA ...................................................................................................... 13 4.2 PETROLEUM SECTOR ............................................................................................................. 15 4.2.1 UPSTREAM (Exploration and Production) ....................................................................... 17 4.2.2 MIDSTREAM (Transportation and Storage) .................................................................... 19 4.2.2.1 PROCUREMENT AND WHOLESALING OF REFINED PRODUCTS .............................. 19 4.2.2.2 PIPELINE TRANSPORTATION ................................................................................... 24 4.2.2.3 BULK STORAGE ....................................................................................................... 25 4.2.3 DOWNSTREAM (Refining and Marketing) ....................................................................... 27 4.2.3.1 REFINERY ................................................................................................................ 27 4.2.3.2 ROAD AND RAIL TANK TRANSPORTATION ............................................................. 30 4.2.3.3 DISTRIBUTION ......................................................................................................... 31 4.2.3.4 SIZE OF THE ZAMBIAN PETROLEUM MARKET ........................................................ 34 4.2.3.5 MARKET SEGMENTATION ....................................................................................... 34 4.2.3.6 BITUMEN ................................................................................................................ 35 4.2.3.7 LPG .......................................................................................................................... 35 4.2.3.8 EXPORTS ................................................................................................................. 36 4.2.3.9 RETAIL ..................................................................................................................... 40 4.2.3.10 PRICING BEHAVIOUR OF OMCs .............................................................................. 43 4.2.3.11 BLENDING, PACKAGING AND TRADING IN LUBRICANTS ........................................ 48 4.3 INTERNATIONAL AND REGIONAL PERSPECTIVES .................................................................. 49 4.3.1 INTERNATIONAL PERSPECTIVES ...................................................................................... 49 4.3.1.1 ENERGY DEVELOPMENTS ....................................................................................... 49 4.3.1.2 INTERNATIONAL PETROLEUM DEVELOPMENTS..................................................... 49 Page i 4.3.2 REGIONAL PERSPECTIVES ................................................................................................ 51 4.3.2.1 ECONOMIC OVERVIEW ........................................................................................... 51 4.3.2.2 ENERGY OVERVIEW ................................................................................................ 52 4.3.2.3 PETROLEUM ............................................................................................................ 53 5 INSTITUTIONAL AND LEGAL FRAMEWORK ................................................................................... 54 5.1 INSTITUTIONAL FRAMEWORK............................................................................................... 54 5.2 LEGAL AND REGULATORY FRAMEWORK .............................................................................. 55 5.3 REGIONAL CONTEXT.............................................................................................................. 59 6 MAIN SUPPORT POLICIES .............................................................................................................. 61 PETROLEUM SECTOR NATIONAL POLICY .......................................................................................... 61 7 ANALYSIS PER SUB SECTOR. .......................................................................................................... 63 7.1 PRELIMINARY ISSUES ............................................................................................................ 63 7.1.1 PRIVATISATION ................................................................................................................ 64 7.1.2 OPEN ACCESS, ................................................................................................................. 64 7.2 PROCUREMENT ..................................................................................................................... 65 7.3 PIPELINE TRANSPORTATION ................................................................................................. 66 7.4 REFINING ............................................................................................................................... 71 7.5 BULK STORAGE ...................................................................................................................... 71 7.6 ROAD AND RAIL TRANSPORTATION ...................................................................................... 71 7.7 DISTRIBUTION ....................................................................................................................... 72 7.8 RETAIL ................................................................................................................................... 78 7.9 BLENDING, PACKAGING AND TRADING IN LUBRICANTS. ..................................................... 80 8 CONCLUSIONS ............................................................................................................................... 80 8.1 CONDITIONS PREVAILING IN THE MARKET ........................................................................... 80 8.2 ROLE OF THE STATE AND PUBLIC POLICIES IN THE SECTOR ................................................. 82 8.3 TRANSPARENCY IN THE SECTOR ........................................................................................... 82 8.4 EFFICIENCY OF THE SECTOR .................................................................................................. 82 8.5 CONDITIONS AND PRACTICES THAT LIMIT COMPETITION IN THE SECTOR .......................... 83 9 RECOMMENDATIONS.................................................................................................................... 84 9.1 MEASURES TO IMPROVE THE CONDITIONS IN THE MARKET ............................................... 84 Page ii 9.1.1 MEASURES TO STRENGTHEN THE INSTITUTIONAL FRAMEWORK .................................. 84 9.1.2 MEASURES TO IMPROVE TRANSPARENCY IN THE SECTOR ............................................. 84 9.1.3 MEASURES TO IMPROVE THE EFFICIENCY OF THE SECTOR ............................................ 84 9.2 MEASURES TO IMPROVE COMPETITION IN THE SECTOR ..................................................... 85 9.3 MEASURES RELATED TO THE ALLEGED ANTI-COMPETITIVE PRACTICES .............................. 85 9.4 MEASURES RELATED TO THE ALLEGED UNFAIR TRADING PRACTICES ................................. 86 9.5 GENERAL MEASURES ............................................................................................................ 86 Bibliography Annexes PROVED OIL RESERVES AT END 1 2009.......................................... APPENDIX I 2 OIL PRODUCTION BY REGION..................................................... APPENDIX II OIL RESERVE TO PRODUCTION (R/P) 3 RATIO................................ APPENDIX III 4 OIL CONSUMPTION BY REGION.................................................. APPENDIX IV 5 CRUDE OIL PRICES 1861 – 2009.................................................. APPENDIX V LOCATION OF AFRICAN 6 REFINERIES............................................ APPENDIX VI COMESA TREATY, ARTICLES 50, 51,52,53,54, & 7 55...................... APPENDIX VII NATIONAL ENERGY POLICY, CHAPTERS 5.4, 5.10, 8 5.11............... APPENDIX VIII 9 NDOLA PUMP PRICES SURVEY (27/08/2010).............................. APPENDIX IX 10 KITWE PUMP PRICES SURVEY (28/08/2010)............................... APPENDIX X 11 LUSAKA PUMP PRICES SURVEY (30/08/2010 - 14/09/2010)....... APPENDIX XI HERFINDAHL HIRSCHMAN INDEX 12 (HHI)...................................... APPENDIX XII 13 LIST OF INTERVIEWEES................................................................ APPENDIX XIII Page iii LIST OF FIGURES FIGURE 1, GDP CONTRIBUTION BY SECTOR .........................................................................................................