Construction of Zimbabwe’s second petroleum pipeline, which its proponents say could transform the country into a regional fuel hub, is predicated on finalising agreements with neighbouring countries involved in the multi-billion-dollar plan, the deal maker told the Zimbabwe Independent this week.
Over the past 13 years, implementation of the US$3 billion strategic project, which involves Zimbabwe, Mozambique and Botswana hung in the balance as the government worked on modalities to tie up the deal with a suitable suitor.
South African firm Coven Energy will inject capital into the project in which Zimbabwe’s government through the National Oil Company (Noic) will hold a 50% stake under a Joint Venture.
Eddie Cross, President Emmerson Mnangagwa’s former adviser and a shareholder in Covern Energy, shared with this publication that implementation of the project was subject to approval by all involved parties.
Cross, who wrote Mnangagwa’s biography titled A Lifetime of Struggle in 2021, said Mozambican authorities were yet to give the project a nod.
“The project will be implemented in stages. Stage 1 will invove strengthening the capacity of Beira Port to handle the very large import needs of the region. At present Beira is handling nearly 10 million litres a day, half of which is being delivered inland by pipeline and half by road. Demurrage on shipping is very considerable,” he said.
“All three phases have to be the subject of a full feasibility study and agreement with the countries involved. We are waiting for Mozambique government approval,” Cross added.
Coven Energy, Cross added, will bankroll the project.
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“The total cost of the project will be about US$3 billion and this has to be raised on the capital markets and the standard basis of such long-term financing is 30% equity and 70% loan term financing.
“Phase 2 will involve dualising the pipeline to Harare with a second pipeline. Phase 3 will focus on establishing lines linking Lusaka/Ndola and Francistown/Polokwane,” he added.
Sources close to the deal told the Independent that an interministerial committee between Zimbabwean and Mozambican authorities had been established to steer the project.
“Authorities in the Mozambican government have indicated that a ministerial steering committee with their Zimbabwean counterparts has been set up to administer the project,” one of the sources with intimate details of the project told this publication.
However, Cross said he was not aware of such a committee and indicated that Covern Energy and Noic had established a platform where the matter was being handled.
“I have no information on any such committee,” Cross told the Independent.
“The Zimbabwe government through Zimbabwe Investment and Development Agency has given approval for the study and we are waiting for the same from Mozambique. We understand it is imminent. “(However) We are on the steering committee of the project with Noic,” he emphasised.
Cross indicated that US$2 million had so far been spent undertaking feasibility studies.
“We have so far spent about US$2 million on studies and negotiations,” he said
Energy and Power Development minister Edgar Moyo had not responded to questions sent to him at the time of going to print.
Broadly, this publication wanted to gain understanding relating to the pipeline’s projected carrying capacity, how Coven Energy would recoup its investment, and the profit-sharing ratio between the involved parties.
The same questions sent to Energy and Power Development secretary Gloria Magombo were not addressed.
Commenting on the profit-sharing structure Cross indicated: “That will be negotiated and agreed between the consortium of Coven and Noic after the full feasibility studies are complete.
“We will follow the example of the present pipeline which has worked well for all parties in the past.”
The only existing pipeline is wholly owned and managed by Pipeline Zimbabwe, a subsidiary of Noic.
Noic assumed full control of the Feruka-Harare pipeline when it snapped 50% equity then held by Lonmin, formerly known as Lonrho.
Mozambique owns the length of the pipeline that runs from Beira to Feruka. Private fuel trading firms pay Noic to use the infrastructure.
In 2021, Noic was charging US$0,07 to move a litre of fuel through the Feruka pipeline. Construction of the Coven Energy-Noic pipeline is expected to utilise Zimbabwe’s underutilised storage capacity, which stands at 500 million litres.
