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How we can solve the current fuel crisis

By Vision Reporter

Added 2nd January 2008 03:00 AM

THE Government must work expeditiously to relieve the current fuel crisis before it starts to cripple the economy and destabilise the region. Any administration should have foreseen the possibility of disruptions from (bad weather or terrorism) and created alternative routes for oil transportation.

By Douglas Kisaka

THE Government must work expeditiously to relieve the current fuel crisis before it starts to cripple the economy and destabilise the region. Any administration should have foreseen the possibility of disruptions from (bad weather or terrorism) and created alternative routes for oil transportation.

No land-locked country can afford to be dependent on one route for the importation of fuel, which is the lifeblood of an industrialising economy, and its national security.

Barring and regardless of an immediate solution to Kenya’s current election crisis, my suggestion to the Government is to engage Sudan and work out interim trade agreements until Uganda is self-sustaining in its oil production and refining capacity, ostensibly 2009.

This will not only enhance cross border relations and trade between northern Uganda and Sudan, but will serve to bolster peace throughout the region.

Both Japan and China import considerable quantities of oil from Sudan. Because of Sudan’s proximity, the fuel may be cheaper than oil imported from the Middle East, via Mombasa or Dar es Salaam.

The Government could pursue this course of action even as it re-directs imports, and as planned upgrades to the road and rail infrastructure in Tanzania take place.

And here’s why this makes the most sense logistically and economically:

Sudan: Refining and downstream
According to US Department of Energy, Sudan’s refineries in Khartoum and Port Sudan had total combined refining capacity of 121,700 bbl/d as of January 2007.

In July 2006, CNPC announced the completion of the Khartoum refinery expansion project, which doubled the refinery’s capacity from 50,000 bb/d to 100,000 bbl/d.

The Khartoum refinery processes Nile blend crude, which has a low sulfur content and high fuel-yield. The additional refinery capacity from the expansion should help alleviate the short supply of refined products available in Sudan, while giving the country some additional export capacity.

The Port Sudan facility is located near the Red Sea and is Sudan’s smallest refinery, with capacity of 21,700 bbl/d.

In September 2005, a contract was awarded to Petronas to build a new refinery at Port Sudan.

The refinery will be designed to process Dar blend crude, which has high-acid content and is found in Sudan’s Melut basin.

The refinery will have capacity of 100,000 bbl/d and could be operational in 2009.

Petronas is joined with the Sudanese Ministry of Energy and Mining in a 50:50 partnership in the project.

World Oil Transit Chokepoints
Over 40 million barrels per day of oil moves by tanker. A significant volume of oil is traded internationally by oil tankers and oil pipelines.

About two-thirds of the world’s oil trade (both crude oils and refined products) moves by tanker. About 43 million barrels per day of that trade is crude oil.

Tankers have made global (intercontinental) transport of oil possible, as they are low cost, efficient, and extremely flexible.

Oil transported by sea generally follows a fixed set of maritime routes. Along the way, tankers encounter several geographic “chokepoints,” or narrow channels, such as the Strait of Hormuz leading out of the Persian Gulf and the Strait of Malacca, linking the Indian Ocean (and oil coming from the Middle East) with the Pacific Ocean (and major consuming markets in Asia).

Other important maritime “chokepoints” include the Bab el-Mandab passage from the Arabian Sea to the Red Sea, the Panama Canal and the Panama Pipeline connecting the Pacific and Atlantic Oceans, the Suez Canal and the Sumed Pipeline connecting the Red Sea and Mediterranean Sea and the Turkish Straits/Bosporus linking the Black Sea (and oil coming from the Caspian Sea region) to the Mediterranean Sea.

“Chokepoints” are important to world oil trade because so much oil passes through them, yet they are narrow and theoretically could be blocked, at least temporarily.

In addition, “chokepoints” are susceptible to pirate attacks and shipping accidents in their narrow channels.

Not all tanker trade routes use the same size ship.

Each route usually has one size that is the clear economic winner, based on voyage length, port and canal constraints and volume.

Thus, crude exports from the Middle East, high volumes that travel long distances, are moved mainly by VLCC’s (200,000 to 300,000 dead weight tons) typically carrying over 2 million barrels of oil on every voyage.

Pipelines, on the other hand, are the mode of choice for transcontinental oil movements.

Pipelines are critical for land-locked crudes and also complement tankers at certain key locations by relieving bottlenecks or providing shortcuts.

Pipelines come into their own in intra-regional trade. They are the primary option for transcontinental transportation, because they are at least an order of magnitude cheaper than any alternative such as rail, barge, or road, and because political vulnerability is a small or non-existent issue within a nation’s border or between neighbours such as the United States and Canada.

Pipelines are also an important oil transport mode in mainland Europe, although the system is much smaller, matching the shorter distances.

In future, the Government should work with all the region’s countries and create and oil pipeline network extending from Mombasa through the Albertine Basin to eastern Congo, and from South Sudan through the Albertine Basin to Rwanda, Burundi and Northern Tanzania.

It will be worth the investment considering the vast reserves of crude oil and natural gas in the Sudan, Uganda, Congo and Tanzania.

In the spirit of reconciliation, we wish our beloved Kenyan brothers and sisters a speedy return to peace and prosperity.

The writer is a Ugandan living in the US

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