In a bid to alleviate shortage of fuel stations in the country, the Ethiopian Petroleum Supply Enterprise (EPSE) is planning build 160 fuel stations across the nation.
CEO of EPSE, Tadesse Hailemariam, told The Reporter that with the view of filling the gap in the fuel distribution sector the Enterprise is planning to form a new company that will engage in fuel distribution business. The board of directors of EPSE, chaired by Motuma Mekassa, former minister of Mines, Petroleum and Natural Gas, who is currently the Minister of Defense, has instructed the management of EPSE to undertake a feasibly study.
Tadesse told The Reporter that the planned company will build 160 gas stations in Addis Ababa and regional towns. Sixty gas stations will be built in Addis Ababa. The Addis Ababa City Administration has agreed to deliver plots of land to the planned petroleum company, according to Tadesse. “For the time being, the administration has prepared five locations for us,” the CEO said.
The management of EPSE will present the business proposal to the board and if approved it will be presented to Council of Ministers for endorsement. EPSE is contemplating to venture into the fuel distribution sector in partnership with a foreign oil firm. “The government will decide either we will from a joint venture company or we shall do it all by ourselves,” Tadesse said.
The Ethiopian fuel distribution sector has several bottlenecks that are hampering the growth of the sector. Low profit margin, unavailability of land for fuel station construction and inefficient transport system are some of the red-tapes hindering the development of the sector.
Ethiopia, with a population of 100 million, only has 800 gas stations while neighboring Kenya with a population of 40 million has over 2,000 gas stations operating in the country. There are 15 oil companies in Ethiopia engaged in the petroleum distribution sector while Kenya has 65 companies.
In Ethiopia there are more than 800,000 registered vehicles and 480,000 of them are concentrated in the capital Addis Ababa. There are only 100 gas stations in the city which most of them are old and have small and ageing fuel depots that have limited storage capacity. These rickety 100 gas stations serve on average 4,000 vehicles. Coupled with other logistical issues, motorists make long queues at gas stations.
The other major obstacle hindering the growth of fuel distribution sector is scarcity of land. Oil companies or private investors who want to build fuel stations will face a myriad of challenges to secure land particularly in Addis Ababa. This has limited the number of gas stations in the capital as well as the regional towns.
Petroleum company owners told The Reporter that due to this and other pertinent issues, investors do not prefer to invest in the oil distribution sector. The investors said petroleum companies are unable to build new gas stations particularly in Addis Ababa.
Oil company executives have expressed their frustrations during a consultative meeting EPSE organized on May 5th at Elily Hotel. Tadesse Tilahun, CEO of National Oil Company of Ethiopia (NOC), highlighted that his company has invested a huge sum of money and created many jobs for the youth. However, Tadesse said the minimal profit margin is discouraging companies not to make new investments.
Lasina Ture, managing director of Total Ethiopia, said that the profit margin, when compared to other African countries, is very minimal, adding that it was deterring investment in the oil distribution sector.
Yigzaw Mekonnen, manager of the newly-established indigenous oil company, Gomeju Oil Ethiopia, told The Reporter that oil companies and gas station owners earn only 15 cents per liter while the minimal profit margin in Africa is 1.50 cents. “There is a huge gap between the profit margin companies get paid here and the lowest profit margin in other African countries,” Yigzaw said.
The oil company earns only eight cents per liter while a gas station owner is paid seven cents per liter. The company executives voiced their concern that the minimal profit margin is weakening the sector there by affecting the overall economic activity of the country. They complained that though they have explained the dire situation to the government repeatedly no remedial action has been taken.
The oil companies pleaded with the senior government officials including the state minister of the Ministry of Mines, Petroleum and Natural Gas Koang Tutlam (MD) and Admassu Nebebe, state minister of the Ministry of Finance and Economic Cooperation who attended the consultative meeting.
The state minister of the Ministry of Mines, Petroleum and Natural Gas Koang said that the government is aware of the reported challenge. He said that the government needs sometime to reconsider the situation and make decision.
Koang gathered executives of the oil companies in his office on Tuesday and assured them that he would present the problem to the government. “Koang wants to draw the attention of the new prime minister, Abiy Ahmed (PhD), to the serious challenges fuel distribution sector is facing,” a source in the ministry told The Reporter. “The cabinet will discuss the matter and pass a resolution,” the source said.
The limited storage capacity of Horizon Fuel Terminal at the Port of Djibouti, the delay with starting transporting fuel by the new railway line and the poor road condition inside the Djibouti territory were some of the challenges raised during the meeting.