Zambia has one of the highest fuel prices in the region at K10.63 ($1.67) per litre which is mostly a consequence of the inefficient procurement process. This contributes a significant portion to the cost of doing business in this country. In a quest to reduce pump prices, the Government is looking to start the blending of biofuels with petroleum products for national consumption at 10 percent and 5 percent for ethanol and biodiesel, respectively.
They are set to kick things off with the blending of gasoline and ethanol (no timeline was given for blending of biodiesel and diesel). To this effect, the Ministry of Mines, Energy and Water Development (MMEWD) recently put out a Request for Proposal (RFQ) for the design and supervision of the construction of gasoline-ethanol blending facilities at Indeni Oil Refinery, Ndola Fuel Terminal, Lusaka and Mpika Fuel Depots.
Gasoline and ethanol blending
Gasoline and ethanol will be blended at a ratio of 9:1. This means that 10 percent of each drop of petrol filled into your vehicle at the gas station will be ethanol. Here are examples of the common gasoline-ethanol blends and widely used feedstock they are produced from:
Biodiesel and diesel blending
Diesel and biodiesel will be blended at a ratio of 9.5:0.5. This means that 5 percent of each drop of diesel filled into your vehicle at the gas station will be biodiesel. Here are examples of the common diesel-biodiesel blends and widely used feedstock they are produced from:
The final piece of the puzzle in this process was the establishment of a mechanism for the pricing of wholesale biofuels which was announced earlier this year. Here is an extract from a ‘Times of Zambia’ article:
The pricing mechanism for biofuels was worked out using the petroleum price framework by applying a 0- 5 per cent discounted rate to the current wholesale prices for petrol and diesel which are at K 5.47 and K 6.20 per litre respectively.
Obviously at this point the wholesale prices of petrol and diesel have gone up because of the Kwacha's depreciation in the first half of the year. But this does mean that potential investors in the sector now have clarity on the price that the government will be buying biofuels for blending purposes. They can now invest in their projects with a better idea of the investment returns they are to expect which will also make it easier for them to raise capital from various sources.
- Job creation: a completely new industrial sector will be created. There is already $650 million dollars which is going to be invested in Luapula province for the setting up of two ethanol plants by 2 different companies (of sugarcane and cassava). They will need workers for crop production as well as operation of ethanol plants. There are also other well established sugar producers who can invest in ethanol production.
- Cheaper and sustainable fuel: blending would reduce the pump price of gasoline (and eventually diesel when biodiesel blending is introduced) which would cut down transportation costs and ultimately trickle down to alleviate the costs of various goods and services. Oil is a finite resource but ethanol can be manufactured locally and in perpetuity as long as the right resources are available.
- Stimulation of agriculture and linked industries: farmers that grow appropriate crops for biofuel feedstock will be motivated to produce more because they would be able to fetch a good price and there would be a readily available market. Interlinked industries such as transport and seed suppliers would also take advantage of this development.
- Cleaner energy source: biofuels burn cleaner than pure gasoline and diesel. Carbon emissions from vehicles would begin to see some decline. And further down the line as the ethanol/biodiesel content of fuel is increased, there would be less demand for oil which is a major air polluter in Zambia as well as globally. Climate change is a huge risk to agriculture which is arguably Zambia’s most valuable asset – it should be better safe guarded.
- Fuel efficiency: ethanol and biodiesel have a lower energy content than pure gasoline or diesel which means that they deliver less power when burned by respective engines. The result is higher fuel consumption and lower mileage (consumes more fuel per Kilometre/Mile). This is more applicable with blends above E10/B5 (E15 – E100 or B20 – B100).
- Older model gasoline-run vehicles phased out as ethanol content increased: vehicle made after 1980 are compatible with the E10 blend. However, as the ethanol content is increased over time (say E15 or above), cars built before 2001 would slowly be phased out because the blend would break down old rubber seals and could result in engine damage. Consumers would be forced to buy newer and pricier vehicles or modify older engines.
- Land for food versus land for fuel: this is a debate which will come up as the population (currently at slightly over 14 million) increases. Demand for food and fuel will also rise (at different rates) and the question over how much land should be allocated for fuel and food will have to be tackled. Population growth will start to negate the fact that Zambia has large tracts of arable land.
Blending has been done in various countries around the world for over 30 years. This could be an important step in securing the energy future of Zambia and could finally see the country’s agriculture sector rising to new heights. However, an interesting wrinkle could be brought about if the results from the oil prospecting blocs awarded last year reveal that Zambia has proven crude oil reserves. Will this negate the need to blend biofuels with petroleum products despite the highlighted benefits?
Trying to decipher this puzzle that is Zambia by using a variety of publicly available data (structured and unstructured) in conjunction with my own skill/experience. * * *