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Report of the Committee on Energy, Water Development and Tourism for the Third Session of the Twelfth National Assembly

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REPORT OF THE COMMITTEE ON ENERGY, WATER DEVELOPMENT AND TOURISM FOR THE FOURTH SESSION OF THE TWELFTH NATIONAL ASSEMBLY Printed by the National Assembly of Zambia REPORT OF THE COMMITTEE ON ENERGY, WATER DEVELOPMENT AND TOURISM FOR THE FOURTH SESSION OF THE TWELFTH NATIONAL ASSEMBLY Table of Contents 2.0 Functions of the Committee ........................................................................ 1 3.0 Meetings of the Committee .......................................................................... 2 4.0 Arrangement of the Report .......................................................................... 2 5.0 Procedure Adopted by the Committee .......................................................... 2 6.0 List of Witnesses ......................................................................................... 2 PART I ................................................................................................................. 2 THE PETROLEUM INDUSTRY: CHALLENGES AND OPPORTUNITIES .................... 2 7.0 Background ................................................................................................ 2 7.1 Objectives of the Study ............................................................................ 4 8.0 SUMMARY OF SUBMISSIONS FROM STAKEHOLDERS ............................... 4 8.1 Legal and Policy Framework Governing the Petroleum Industry in Zambia 4 8.1.1 Legal Framework................................................................................ 4 8.1.2 Adequacy of the Legal Framework ...................................................... 5 8.1.3 Policy Framework ............................................................................... 6 8.1.4 Adequacy of the Policy Framework ..................................................... 6 8.2 Status of Petroleum Infrastructure ........................................................... 7 8.3 Supply Chain Effect on the Pricing of Petroleum Products ....................... 10 8.4 Transportation of Petroleum Products in Zambia .................................... 17 8.5 Status of Oil and Gas Exploration in Zambia .......................................... 19 8.6 Challenges faced in the Petroleum Industry ............................................ 21 8.6.1 Down Stream Petroleum Sub Sector ................................................. 21 8.6.2 Upstream Petroleum Sub Sector ....................................................... 26 8.7 Opportunities in the Petroleum Industry ................................................ 28 8.7.1 Downstream Petroleum Sub Sector .................................................. 28 i 8.7.2 Upstream Petroleum Sub Sector ....................................................... 29 8.8 Recommendations on how to Establish a Sustainable Petroleum Industry 30 8.8.1 Downstream Petroleum Sub Sector .................................................. 30 8.8.2 Upstream Petroleum Sub Sector ....................................................... 31 8.9 COMMITTEE’S OBSERVATIONS AND RECOMMENDATIONS .................. 32 8.9.1 Downstream Petroleum Sub Sector .................................................. 32 8.9.2 Upstream Petroleum Sub Sector ....................................................... 38 PART II .............................................................................................................. 41 9.0 Consideration of the Action Taken Report on the Report of the Committee on Energy, Water Development and Tourism for the Third Session of the Twelfth National Assembly .................................................................................... 41 10.0 Consideration of the Action Taken Report on the Report of Committee on Energy, Water Development and Tourism for the Second Session of the Twelfth National Assembly ........................................................................ 63 11.0 Conclusion ............................................................................................... 81 APPENDIX I – LIST OF WITNESSES ................................................................... 83 APPENDIX II - List of National Assembly Officials ............................................... 86 ii REPORT OF THE COMMITTEE ON ENERGY, WATER DEVELOPMENT AND TOURISM FOR THE FOURTH SESSION OF THE TWELFTH NATIONAL ASSEMBLY 1.0 Membership of the Committee The Committee consisted of Mr E K Belemu, MP (Chairperson); Ms M C Chonya, MP (Vice Chairperson); Mr C M Zulu, MP; Mr D Mung’andu, MP; Mr M Jamba, MP; Mr J Chabi, MP; Mr K Mbangweta, MP; Mr S Mulusa, MP; Mr Romeo Kangombe, MP and Mrs J Mumbi-Phiri, MP. The Membership of the Committee changed following the appointment of Mrs Margaret D Mwanakatwe, MP, who replaced Mrs J Mumbi-Phiri, MP, to the Committee. The Honourable Mr Speaker National Assembly Parliament Buildings LUSAKA Sir, The Committee has the honour to present its Report for the Fourth Session of the Twelfth National Assembly. 2.0 Functions of the Committee The functions of the Committee on Energy, Water Development and Tourism, as set out in Standing Order No. 157 (2), are to: (i) study, report and make the appropriate recommendations to the Government through the House on the mandate, management and operations of the Government ministries, departments and agencies under its portfolio; (ii) carry out detailed scrutiny of certain activities being undertaken by the Government ministries, departments and/or agencies under its portfolio and make appropriate recommendations to the House for ultimate consideration by the Government; (iii) make, if considered necessary, recommendations to the Government on the need to review certain policies and existing legislation; (iv) examine annual reports of Government ministries and departments under its portfolio in the context of the autonomy and efficiency of Government ministries and departments and determine whether the affairs of the said bodies are being managed according to relevant Acts of Parliament, established regulations, rules and general orders; (v) consider any Bills that may be referred to it by the House; (vi) consider international agreements and treaties in accordance with Article 63 of the Constitution; 1 (vii) consider special audit reports referred to it by the Speaker or an Order of the House; (viii) where appropriate, hold public hearings on a matter under its consideration; and (ix) consider any matter referred to it by the Speaker on an order of the House. 3.0 Meetings of the Committee The Committee held fourteen meetings during the year under review to consider submissions from various witnesses on the topical issue: ‘The Petroleum Industry in Zambia: Challenges and Opportunities.’ The Committee also considered the Action-Taken-Report on the Report of the Committee on Energy, Water Development and Tourism for the Third Session of the Twelfth National Assembly. 4.0 Arrangement of the Report The Committee’s Report is organised in two parts. Part I deals with the consideration of the topical issue. Part II speaks to the Committee’s consideration of the Action-Taken Report on the Report of the Committee on Energy, Water Development and Tourism for the Third Session of the Twelfth National Assembly. 5.0 Procedure Adopted by the Committee In order to have a better understanding of the topical issue under its consideration, the Committee requested for detailed memoranda from relevant stakeholders on the topical issue. In this vein, the Committee received both written and oral submissions from stakeholders on the topical issue. 6.0 List of Witnesses The stakeholders who interacted with the Committee are listed under Appendix II. PART I THE PETROLEUM INDUSTRY: CHALLENGES AND OPPORTUNITIES 7.0 Background The petroleum industry in Zambia was characterised by the upstream and downstream petroleum sub-sectors. The upstream component comprised crude oil exploration, production and transportation, while the downstream industry involved product refining, transportation, storage, distribution and retail. Petroleum played a crucial role in the running of Zambia’s economy particularly in the agriculture, transport and mining sectors and contributed 9 per cent of the nation’s total energy requirements. Consequently, the cost of petroleum imports affected the cost of production and the development trajectory. All petroleum requirements in Zambia were met through imports because the country did not have any proven crude oil reserves. The importation of petroleum dominated all 2 other expenditure and formed a major part of Zambia’s import bill. Based on this fact, the domestic prices of petroleum products were mainly influenced by the international oil prices and the exchange rate of the United States Dollar to the Zambian Kwacha. At Zambia’s independence in 1964 and until 1965, the country’s petroleum demands were met through importation of finished petroleum products into the country by multinational oil marketing companies (OMCs). These products were mainly supplied by rail using the southern corridor through Livingstone. In 1967, the Government of the Republic of Zambia and United Republic of Tanzania signed a convention for the construction and operation of a pipeline for the transportation of finished petroleum products and crude oil from Dar-es-Salaam on the Tanzanian coast to the Ndola Fuel Terminal in Zambia. Thus, the Tanzania Zambia Mafuta (TAZAMA) Pipeline Limited was jointly owned by the Governments of Zambia and Tanzania, with 67 per cent and 33 per cent ownership, respectively. The Indeni Petroleum Refinery was constructed
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