PETROLEUM Regulation
Zambia’s total petroleum requirements are met through imports because the country does not have any proven reserves of crude oil. The petroleum industry in Zambia is made up of TAZAMA Pipelines, which is owned, by the Governments of Zambia and Tanzania, Indeni Refinery, which is jointly owned by the Government of Zambia and an international oil company, Total Outre mer and the Ndola Fuel Terminal, which is also owned by the Government of Zambia.
There are 18 Oil Marketing Companies (OMCs) involved in the distribution and retailing of petroleum products. The downstream is also made of various fuel transporters and dealers contracted by OMCs to transport fuel by road from the fuel terminal and operate service stations respectively.
The wholesale petroleum prices are regulated by the ERB due to the monopolistic nature of the industry. Indeni currently carries out the importation of feedstock. With respect to pump prices, the Government liberalized pump prices in June 2001 as part of its economic reforms. ERB therefore takes on an ex-post monitoring role for pump prices whilst regulating ex-refinery gate prices. There are established margins for OMCs, dealers and transporters and ERB ensures that prices remain in a reasonable band to ensure that the consumer is not overcharged.
Petroleum Statistics
The following files are large zipped Excel spreadsheets covering, among other things, the market share, percentages, quantities, and provincial splits for commercial, retail, aviation & lubricants. The raw data is also included.
Petroleum Pricing
Petroleum prices in Zambia are determined through the Cost-Plus Pricing Model (CPM). This model has been in effect since January 2008, after the Import Parity Pricing Model which had been in use since 2004 was discontinued following concerns raised by stakeholders. The CPM is used to determine prices for each cargo and provides for longer intervals of price stability. It therefore takes into account all costs associated with the purchase of the feedstock as shown in the table below:
| COST ELEMENT | UNIT COST |
|---|---|
| Cost of petroleum feedstock (Cost-Insurance-Freight at Dar-es-salaam) | |
| Ocean loss | 0.30% |
| Wharfage | 1.25% |
| Finance Charges | 4.00% |
| Collateral Manager | US$0.39/mt |
| Insurance | 0.15% |
| TAZAMA Storage fee | US$2/mt |
| TAZAMA Pumping fee | US$54.00/mt |
| TAZAMA Pipeline losses (pipeline consumption of 0.83% & allowable pumping losses of 0.65%) | 1.48% |
| Agency fee | US$5.00/mt |
| Refinery fee | US$60.38/mt |
| Refinery Processing Losses | 9% |
| Terminal Losses (1% for LPG, 0.5% for Petrol Kerosene & Jet A-1, 0.3% for diesel & HFO) | 1%, 0.5%, 0.3% |
The total cost is converted into kwacha using a projected US$ to Kwacha exchange rate. The rate is assumed to be the rate that will be in effect at the time that the buyer will need to purchase US dollars for making payments to suppliers and service providers during the life of the petroleum feedstock cargo.
The CPM therefore ensures that all costs incurred in the procurement of feedstock are recovered through sales of petroleum products. This is necessary in order to collect all the funds incurred when purchasing the particular cargo.
Pump Price determination
| COST ITEM | AMOUNT | CODE |
|---|---|---|
| WHOLESALE PRICE TO OMC | a | |
| Terminal Fee | K0.025/litre | b |
| Marking Fee | K0.10/litre | c |
| Excise Duty (incl.) road levy | K1.97 for Petrol, K0.62 for Diesel, K0 for Kerosene and K0.62 for LSG | d |
| Ex NFT Gate | e=(a+b+c+d) | |
| Transport Cost | K0.26 for Petrol, K0.26 for Diesel, K0.09 for Kerosene and K0.26 for LSG | f |
| OMC Margin | K0.56/litre | g |
| TOTAL (Excl VAT) | h=(e+f+g) | |
| Dealer Margin | K0.38/litre | i |
| PRICE TO DEALER | j=(h+i) | |
| ERB Fees | 0.70% | k |
| Strategic Reserves Fund | K0.15/litre for Petrol, Diesel and Kerosene | l |
| Price before VAT | m=(j+k+l) | |
| VAT | 16% | n |
| UNIFORM PUMP PRICE | K/litre | o=(m+n) |
Licensing Procedure
The criterion for awarding licenses is based on the premise that the Energy Regulation Board must license all enterprises conducting business in the energy sector. By virtue of section 10 (1) and (2) of the Energy Regulation Act No. 12 of 2019 (“the Act”) of the Laws of Zambia, it is an offence to establish or operate an enterprise without a license issued under the Act. The types of licenses issued by the Board are:
- Pipeline transportation of crude oil, petroleum products and natural gas;
- Refining of petroleum products;
- Processing of natural gas;
- Terminal storage of petroleum products;
- Wholesale marketing of petroleum products;
- Distribution, importation and exportation of petroleum products;
- Distribution, Importation and Exportation of Liquefied Petroleum Gas;
- Retail of petroleum products;
- Transportation of petroleum products; and
- Transportation and marketing of coal
The licensing of activities in the energy sector is regulated by the Act as read with the Energy Regulation (General) Regulations, 2021, Statutory Instrument No. 42 of 2021.
Typically, an application for a license should be commenced by completion of the prescribed application Form, accompanied by other relevant information as applicable to the license being applied. The application form currently attracts a non-refundable amount of K1, 000.20.
Upon submission of the duly lodged Application, most applications require that a physical inspection of the assets or project be undertaken by the ERB. Thereafter, the applicant is required to pay an assessment fee, calculated at 0.1 of the cost of the envisaged investment. If the outcome of the inspection is positive and payment of assessment fee is done, the licensing regulations require that the application be advertised in the Government Gazette for a period of fourteen days, during which period the public is offered an opportunity to comment on or object to the issuance of the license applied for.
If after the prescribed fourteen day period, no adverse reports or objections are received with respect to the license application, the ERB will ordinarily proceed and issue the license.