Rwanda banks on commercial storage to shore up fuel capacity

Rwanda says it has designated a total of 80 hectares of land to rally the private sector investments into constructing bulk petroleum storage facilities, in a move that would improve the country’s fuel security. The development was confirmed by the Permanent Secretary at the Ministry of Trade and Industry, Richard Niwenshuti. Currently, all the reserves are government-owned, however, commercial storage would mean that the reserves are owned by private companies but managed and regulated by the government. ALSO READ: Explainer: Rise of fuel prices and impact on cost of living Speaking to The New Times in an exclusive interview, Niwenshuti pointed out that Rwanda currently consumes 54.5 million liters of petroleum products every month, the majority of which is imported. He added that the current storage capacity stands at 117 million liters, falling short of the country’s 2024 ambitious projected target of 337 million liters. Rwanda, like all energy importers, faces long-run risks associated with the supply of fossil fuels, high oil prices on international and domestic markets, political instability in oil-producing and exporting countries, piracy along the major maritime routes, as well as instability in transit countries. “This is a resource-intensive industry, where we are seeking to attract private investments to further strengthen our capacity and ensure that we weather the crisis that comes through relying on imports,” he said. He added; “It would be very crucial for our country in terms of safety but also financially.” Niwenshuti explained that with commercial storage, investors rush to purchase petroleum products in a less costly season, leaving them with a chance to make huge profits. The breakdown According to Niwenshuti, the designated land is in the Rugende area, some 21 kilometres from the capital, Kigali. “We have so far completed the evaluation of the property study, and our findings indicate that at least Rwf22 billion would be needed for expropriation of the families residing in the same area,” he noted. He added; “We are now seeking funding for the feasibility study which should be provided for in the next fiscal year.” When pressed for details, Niwenshuti maintained that the feasibility study is expected to assess different aspects of the project including the financing model. “The study would allow for a better understanding of who funds what and when,” he said. Reacting on the proposed location, he explained that the reserves must be constructed in less-urban areas, and other reasons including security. Rwanda’s petroleum transport infrastructure primarily composed of road transport from Kenya and Tanzania which are the main transit countries of the country’s fuel imports is expensive and often ridden with weak infrastructure systems. However, there are plans underway to extend the Nairobi—Eldoret pipeline to Kampala and Kigali; and new lines in western Kenya have opened up the development of other projects such as the Kisumu Oil Jetty that could serve Rwanda better. A proposed railway system to Kigali from Tanzania is also being planned. “These two transportation systems should be pursued with more vigour since they will greatly improve the efficiency and cost effectiveness of petroleum products importation for Rwanda,” the Rwanda Downstream Petroleum Policy (2020) reads in part. “We continue to pursue cost-effective supply mechanisms that offer domestic markets availability of products at competitive prices,” Niwenshuti asserted. “In the new plan, more areas across the country will be mapped and designated as suitable for bulk petroleum storage infrastructure facilities investments.” The landlocked status of Rwanda makes it necessary to institute ways to increase petroleum supply assurance. The key challenges faced, according to the Rwanda Association of Petroleum Products Importers (ASSIMPER), include global price volatility, unreliable product supplies, high transport costs due to insufficient transport and insufficient storage capacity. This, the association reiterated, negatively impacts imports, re-exports, distribution and maintenance of strategic reserves of petroleum products.

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Rwanda banks on commercial storage to shore up fuel capacity