Fuel, City’s Unyielding Test




In the late afternoon of May 3, 2017 in Mexico area, as the sun sets behind the Federal Police Headquarters, the first facility in the Y-junction of the Mexico roundabout – Total gas station – is sandwiched by at least 70 vehicles pulling up every now and again behind those in front, hoping to get fuel for their cars.

Matias Temesgen, who uses almost 20lt of fuel a day, is amongst the 70 vehicles that lined up to get oil from the gas station. Over the past three months, except a few exceptional days, he needed to wait for at least half an hour to get oil due to the shortage problem prevailing in the city in recent times.

“I am wasting time and money,” he said. “I could have earned 50Br in this half hour if there was no such a problem and line-ups.”

But unfortunately, being an order of the streets around gas stations, the recurring fuel shortage driven queues are one of the too cliché features of the capital these days. Drivers were rushing to replenish gasoline supplies in various neighbourhoods of the city on Wednesday as drivers lined up at fuel filling stations amid a worsening shortage in fuel stacks.

“There are times I went to more than four filling stations, and I couldn’t fill up my tank,” Matias said. “There have been people waiting 30 minutes here, and sometimes they might not be able to fill up today.”

The delays put an extra hardship on the city’s more than two million users of transport facilities, where many already jostle for hours in hot lines for taxis and buses caused by incommensurate buses and taxis.

While the Ministry of Mines, Energy & Petroleum (MMEP)says the situation is back to normal and blamed the lines on transport delays, dozens of cars could be seen meandering through streets, and some service stations were shut entirely.

This week, not a few stations in the city are temporarily closed. At some places like around Zenebeworq and Ayer Tena areas, people were selling benzene outside gas stations using bottles and cans, charging a higher fee after witnessing the gap in demand and supply.

“We are repeatedly told to wait till other retailers get fuel,” said Gizachew Zergaw, a pump attendant at Total Station located in Mexico area, which serves more than a hundred vehicles a day.

The oil shortage that hits Addis Abeba began two months ago after Ethiopian Road Authority started the upgrading of a bridge at the gate of Bahirdar, which is a gateway for 40pc of the country’s oil supply. Since then, there has been a persistent shortage of fuel in Addis.

However, for some, the problem of the road was a temporary problem.

“Soon after the upgrading began, we set alternative routes for those who travel at night time,” said Samson Wondimu, communications director of Ethiopian Roads Authority. “The upgrading of the bridge cannot be blamed anymore.”

The problem of logistics and transportation has always been a major issue in imports of goods and services. Now the problem is putting a dent on consumers in Addis Abeba.

Following the problem, to fill the gap in demand in Addis Abeba, since the last holiday, the Ministry stated to use the strategic oil reserve in Sululta and Awash, according to oil producers Fortune spoke to.

“The problem is mostly observed in Addis,” said an officer who works in the department of operations at OiLibya, whose market share is around 24pc in Ethiopia.

The officer believes the primary cause of the problem is not a shortage.

“The major reason for the recent queue in Addis is due to a disturbance in the distribution system,” the officer said. “We are having no difficulty to transport oil from Djibouti to other cities except Addis Abeba.”

Alemayehu Tsegaye, communications head of Ethiopian Petroleum Supply Enterprise (EPSE), which procures oil and controls the oil reserve on behalf of the government, says that there is enough amount of petroleum for the country.

“We even put a reserve amount which is sufficient to fill an oil demand for 45 days,” he said.

Nine months ago, the EPSE awarded Petro China for the supply of 1.3 million metric tonnes of fuel. The fuel delivers from January to December 2017.

In 2015/16, the Enterprise imported three million metric tonnes of petroleum products worth 30.3 billion Br, which was 20pc lower than the previous year, mainly due to a significant drop in international oil prices. All imports of products are made via Djibouti and Sudanese ports by EPSE.

On the other hand, representatives from the MMEP argue differently.

Admitting the problem, Bacha Fuji, communications director of the MMEP, connects the current queue for oil with the wrong speculation of people.

“Speculating a hike in price, most people line up to buy oil at the conclusion of every month,” said Bacha. “Except that, everything has shown a significant improvement over the past two weeks.”

Over the previous five years, imports of petroleum have shown annual growth of 12pc. The number of companies engaged in the supply of oil is now 14. They possess close to 700 petrol stations, according to the EPSE, which happens to be one-third of the number of stations in Kenya.

Teklebrehan Bekele, an operations manager at NoC, believes the shortage in Addis is due to lack of enough petrol stations to meet the demand in the city.

“The City’s administration has ignored that petrol stations are important,” he said. “To list an example, people who live in the city’s outskirts are the major ones to feel the brunt of travelling a long distance to get to stations.”

The 10th master plan of Addis Abeba did not also include where petrol stations are located in the city.

Lack of clear policy from the city administration to alleviate the shortage of petrol stations is also another bottleneck for the market.

Gomeju Oil Ethiopia is one of the companies that failed to open a petrol station in Addis as it had planned.

“Getting land to open petrol stations is a daunting challenge for us,” said Yigzaw Mekonnen, Chief Executive Officer of Gomeju, whose petrol stations are 24.

The company has waited more than a year to get a plot of land to open a petrol station at Tulu Dimtu.

Also, the high amount of working capital needed to open a petrol station is another cumbersome issue to open more petrol stations. At least 15 million Br of initial capital is required to open a petrol station.

“With such a lofty cost, it might take more than a decade to get a return for those who open petrol stations,” said an industry insider.

The margin of profit from fuel is minuscule in the oil industry since the federal government firmly guards imports and distributions. Oil companies rather make money from imports and retail of lubricants, not from fuel sale.

With a profit margin of seven cents for every litre, it is hard to make a profit for most oil suppliers in the country. Currently, a committee led by the Minister of Mines is undertaking an investigation to review the margin.

Nevertheless, the demand for fuel grows by a significant amount annually in line with skyrocketing numbers of vehicles in the city. In a country where around 18,000 vehicles are imported annually, the demand and supply for oil are unmatched.

However, a huge gap remains in the oil market, and the needs of the city have not been met yet.



By SAMSON BERHANE and BINYAM HAILEMESKEL
FORTUNE STAFF WRITERS

Published on May 06,2017 [ Vol 19 ,No 888]


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