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Engen Botswana Limited – a listed downstream petroleum marketer – says the decline in international crude oil prices in 2014 was not as severe as the year before which resulted in substantial inventory revaluation losses at the time. The company Managing Director Chimwete Monga said in the annual report that the industry continued to individually lobby government to improve allowed margins in order to ensure the continued financial viability of the oil marketing companies operating in Botswana. Monga says the uneven playing field in the largely unregulated commercial sector makes it increasingly difficult for international players to remain in the space. “Nevertheless, we will continue to focus on the retail expansion and innovation, we will also seek out commercial customer value adding solutions,” he says in the report, adding that standardisation of Engen operations in line with international best practices and prudent management of operating expenses will remain the cornerstone of the business as the company seeks to become the leading petroleum company in the country.
Engen decries that the commercial sector of the business was dealt a blow during the year with the situation worsened by the sectors such mining, construction and agriculture which were all affected by the global and local economic conditions. “The closure of two copper mines was the most dramatic manifestation of this.” He, however, says a reduction in purchases of petroleum products was noticed across board, which is believed to be an indication of general scaling back of economic activity. In response to the loss of mining clients, Engen says it had to find new customers with the strategy paying dividends. With regards to supply, Monga says it was relatively stable during the year with the company also piloting importation of product from Beira, Mozambique as a backup to potential future disruptions of supply in South Africa where Engen source its products.
While the move to source from Mozambique is reported to be a success and Engen is now considering volumes from that country. Monga says a few issues will need to be ironed out with the government around the pricing structures before the Mozambique route can be utilised on regular basis. Monga says the industry is experiencing high and accelerating levels of competition with over 80 indigenous companies having been registered by government agencies as at June 2015. He adds that the industry is encouraging the government to properly license these entities so that their activities are adequately regulated and they fall within the slate and tax net. Monga also calls for all petroleum companies to be subjected to the same technical quality standards for equipment and storage.