Fall in petrol price looms

via Fall in petrol price looms | The Herald May 6, 2015

Government has increased the mandatory blending ratio of unleaded petrol from five percent ethanol to 10 percent, in a move likely to see a nominal decrease in the pump price of the blend.The current pump price of E5 petrol ranges between $1,44 and $1,49 per litre, depending on location.

The blending ratio was reduced from 15 percent to 5 percent in December last year due to low sugarcane supplies from Green Fuel, which is the country’s sole supplier of ethanol after the company faced challenges in harvesting cane.

Green Fuel — a joint venture between the Government through Arda, and two private investors Macdom and Rating — yesterday confirmed that Government wrote to them recently granting them the nod to increase the blending ratio to 10 percent.

In an interview, Arda board chairman Mr Basil Nyabadza said they were already building reserves to ensure they reach the 15 percent blending ratio by next month.

“Yes, we have been given the green light to increase the blending ratio from 5 percent to 10 percent,” he said.

“Obviously that should result in reduction of fuel price and the Zimbabwe Energy Regulatory Authority should ensure that oil companies pass the benefit to the motoring public.

“At national level, this will improve liquidity in the economy because Government will have cut the fuel import bill by 10 percent and there will be also jobs and skills retention.”

Mr Nyabadza said Green Fuel would intensify production in the last quarter of the year to build reserves that would cover the summer period.

Last year the company struggled to supply ethanol in summer after they failed to harvest sugarcane due to water clogging in the cane fields.

“We propose to review the mandatory blending levels again to 20 percent as we continue to build stocks for blending,” he said.

“We want to build stocks to manage the period from December to February. Between September and November. We want to increase production and ensure that we have enough stocks in summer.”

The company initially projected that by 2018 it would have completed the construction of Kondo Dam, which is worth $300 million and also employing 36 500 people.

Although the objective still stands, its implementation had changed due to several factors.

In this regard, Mr Nyabadza said they were struggling to get a financial model that matched the joint venture model under which the project was now being implemented.

Initially, the project was a 25 year Build Operate and Transfer model.

“We are having challenges in securing a corresponding financial model to match the joint venture business model that we now have,” he said.

“We still have the objective of constructing the Kondo Dam and expand the sugar cane hectarage but the implementation timeframe has changed due to financial challenges. If we find quickly a financial model that matches the joint venture business model implementation is not going to be a problem.”

Last year Government contracted Triangle to temporarily supply ethanol after Green Fuel failed to meet the increasing demand on the market.