Zambia imports all of its petroleum needs as it has no domestic crude oil reserves. Fuel prices in Zambia are regulated and determined using a cost-plus pricing model. This model takes into account all costs of procuring feedstock and ensures full cost recovery. Fuel consumption in Zambia averages around 52 million liters per month and is projected to grow 40% annually. Recent declines in global oil prices have led to drops in domestic fuel prices in Zambia. However, prices are expected to rise 5-7% until the end of 2015.

1. Zambia Fuel Price Trends and Forecasts
White-Paper for Information Purposes
Zambia country profile

2. Introduction
Zambia'soverall petroleumneedsare supplied throughimports asthe countrydoes nothave any
established reservesof crude oil.The petroleumindustryinZambiaismade upof TAZAMA Pipelines,
whichisowned bythe Governmentsof ZambiaandTanzania; Indeni Refinery,whichisjointly
ownedbythe Governmentof Zambiaandan international oil company,Total Outre mer;andthe
NdolaFuel Terminal,whichisalsoownedbythe Governmentof Zambia.
.
There are 18 Oil MarketingCompanies(OMCs) involvedinthe distributionandretailing of petroleum
products.The downstreamismade upof variousfuel transportersanddealerscontractedbyOMCs
to transportfuel byroad fromthe fuel terminal andoperate service stationsrespectively.
Wholesale petroleumpricesare regulatedbythe EnergyRegulationBoard(ERB) due tothe
monopolisticnature of the industry.Indenicurrentlycarriesoutthe importationof feedstock.With
respectto pumpprices,the GovernmentliberalizedpumppricesinJune 2001 as part of itseconomic
reforms.ERB therefore takesonanex-postmonitoringrole forpumppriceswhilstregulatingex-
refinerygate prices.There are establishedmarginsforOMCs,dealersandtransportersand the ERB
ensuresthatpricesremainina reasonable bandtoensure thatthe consumerisnot overcharged.
.
Pricing ofPetroleumProducts
The pricingof these productswasinitiallyonacost build-up(costplus) basis.Howeverthis approach
didnot provide anyincentivetothe crude oil importerandrefinerytoimprove efficiency. InJune
2004 therefore the ERBintroducedImportParityPricing(IPP) of petroleumproducts.The refinery's
wholesalepricesforpetroleumproductsare benchmarkedtothe cost of buyinga finishedproduct
on the worldmarketand transportingittothe marketinZambia.In orderto allow forfair
comparability,itisassumedthatthe landedcostof the finishedproductwouldbe calculatedasthe
CIF price to the seaport (Dar-es-salaam)plusthe equivalentcostof transportationusinga
combinationof rail androad transportation(rail/rodemode).).A discountfactorisalsoappliedto
the determinedIPPprice.The purposeof thisistotake accountof the benefitsof the country
owningthe infrastructure,i.e.the TAZAMA pipeline.
PetroleumpricesinZambia atpresenthoweverare determinedthroughthe Cost-PlusPricing Model
(CPM).Thismodel hasbeenineffectsince January2008, after the ImportParityPricingModel which
had beeninuse since 2004 was discontinuedfollowingconcernsraised by stakeholders. The CPMis
used to determine prices for each cargo and provides for longer intervals of price stability. It
therefore takesintoaccountall costsassociatedwiththe purchase of the feedstock as shown in the
table below:
1
Cost of petroleum feedstock *
(Cost-Insurance-Freight at Dar-es-salaam)
2 Oceanlossat 0.3% 0.3%

3. 3 Wharfage at 1.25% 1.25%
4 Handlingfees US$0.20/mt
5 TIPER fees US$0.75/mt
6 Finance Charges 2.95%
7 Collateral Manager US$1/mt
8 TAZAMA Storage fee US$2/mt
9 Pumpingfee US$39/mt
10 TAZAMA lossat 0.85% 0.85%
11 Crude Oil ImportDuty at 5% 5%
12 Agencyfee US$15/mt
13 Processingfee US$61.10/mt
14 Refinery loss 10%
15 Terminal lossonfinishedpetroleumproducts(0.30% &
0.50%)
*This cost variesandis dependentonthe price of crude oil onthe international market.
The total cost isconvertedintoKwacha(ZMW) usinga projectedUS$ to Kwachaexchange rate.The
rate isassumedtobe the rate thatwill be ineffectatthe time thatthe buyerwill needtopurchase
US dollarsfor makingpaymentstosuppliersandservice providersduringthe life of the petroleum
feedstockcargo.
The CPM therefore ensuresthatall costsincurredinthe procurementof feedstockare recovered
throughsalesof petroleumproducts.Thisisnecessaryinordertocollectall the fundsincurredwhen
purchasingthe particularcargo. .
Calculation of Pump price
1 WHOLESALE PRICE TO OMC a
2 Terminal Fee K25,000/m3
b
3 Road Levy 7%;15% c
4 Excise Duty 21% d
5 Ex Refinery Gate K/M3 E=(a+b+c+d)
6 Transport Margin K148/litre f
7 OMC Margin K345/litre g
8 TOTAL (Excl VAT) H=(e+f+g)
9 Dealer Margin K229/litre I
10 PRICE TO DEALER J= (h +i)
11 ERB Fees 0.70% k
12 Strategic Reserves Fund K/litre l
13 Price before VAT m=(j+k+m)
14 VAT 16% n
15 BENCHMARK PUMP PRICE K/litre
P=(m+n)

4. Zambia Fuel Usage
The current demandforthe petroleumproductsinthe countryisaround 52 million litres per month
inwhichgasoline anddiesel fuel is approx.30million litres per month and petrol approx. 10 million
litres per month. It is projected to grow by an average of about 40% per annum.
Type of petroleum products in Zambia Average monthly consumption (per litre)
Petrol premium 12,000,000
Diesel/Gas oil 30,000,000
Other 10,000,000
Source: Zambia Energy Sector profile 2014
The 3 mainsuppliers of fuel inthe countryare as follow:
 Indeni Oil Refinery
 PetrotechOil Corporation
 DalbitOil Corporation
Indeni hasbeen operatingfor30 yearsand is the only Refineryinthe country.Itproducesabout
50% of its capacitydue to maintenance andupgrade issues. The graphbelow illustratesthe steady
decrease inproductionoverthe past5 years. As a resultitis necessarytoimportfuel toZambia
fromSouth Africa,Mozambique,Zimbabweand Tanzania.
Source:http://www.erb.org.zm/downloads/eregulation/statisticalbulletin/2013and2014.pdf
The Tazama pipeline also requires investmentforupgrade purposes. The upgradingof both the
Tazama pipelineandthe Indeni refinery hasbeenrecommendedasthe mostefficientwaytoreduce
the amountof diesel and Fuel importedforfeedstock.
0
200000
400000
600000
800000
2010 2011 2012 2013 2014
LitresofCrudeOil
Year to Year
Production from Indeni Refinery

5. Figure1: ZambiaAnnual Fuel Price 1991 - 2015
Source:WorldBank
The fuel price hasdroppedsteadilysince 2008 and decreasedsignificantly atthe endof 2014. The
ERB (EnergyRegulationBoard) announcedthe new price structure linkedtothe fallingprice of crude
oil on the 16th
January2015.
Current New Change
Petrol K9.89 K7.6 23.13%
Diesel K9.18 K6.59 28.22%
16-Jan-15
The drop in the fuel price is largely due to:
o The focusbyOPEC producingcountriesonincreasingtheirmarketshare
o SlowanddeterioratingEUeconomiesandthe slowingof Asianeconomies,leadingtoa significant
reductionindemandlevels
o Significantgrowthinthe U.S.domesticcrude oil production
As a resultthere isanoversupplyof Brentcrude oil inthe market,and priceshave dropped
accordingly.
There isuncertaintyonhowlongthissituationwill continue andoil priceshave once againincreased
to around $60 per barrel.
Zambian Currency and Exchange Rate
The country has changeditscurrencyfrom the old Zambia Kwacha ZMk* to the new Zambia kwacha
ZMW. The current exchange rate to the US dollar is 1U$/6.56168 ZMW (10/02/2015)
0
5
10
15
1991 1992 1995 1998 2002 2004 2006 2008 2010 2012 2014 2015
Zambia Annual Fuel Price 1991-2015 (ZMW)
Pump price for gasoline (ZMW per liter)
Pump price for diesel fuel (ZMW per liter)
2 per. Mov. Avg. (Pump price for gasoline (ZMW per liter))

6. Source:http://www.oanda.com/currency/historical-rates
The ZMW has maintaineditsstrengthagainstthe USdollaroverthe past twoyears,and as such,has
not impactedsignificantlyonthe fuel price.
The Future
Given the current situation, and taking into account the Brent Crude Oil predictions and currency
exchange factors, we anticipate that the Zambian fuel price will increase between 5 – 7% until
December 2015. We therefore recommend that an annual inflation of at least 7% is budgeted for
fuel in 2015.
We wouldalsorecommendthatyoureview your fleet mix and operational costs at least every two
years to ensure you optimise cost and efficiency within your fleet.
Shouldyourequire anyassistance inthisregard,please contactthe FleetConsultingteamdirectly or
via your account manager.
Country Manager: Elmien Gresse
Email:egresse@eqstrafleet.com Office Tel:+260 211 268 724 Cell:+260 963 742 427
7 ChindoRoad,Woodlands,Lusaka
www.eqstrafleet.com
All rights reserved. The information containedinthisdocument is confidential andhas been prepared by EQSTRA FLEET
CONSULTING solelyfor informationpurposesto our strategic clients;it is not to be relieduponbyany third party without
our prior written consent.
This report, whilst basedonthe most realistic information and proven statistical methodologies available to us at
publication and is intended to provide general information. It is not an exhaustive treatment of the subjects raised.
Accordingly, it should not be relied onto address specific situations or circumstances and is not a substitute for accounting,
tax, legal, or other professional advice.
Before making anydecisionor taking or refrainingfrom anyactionwhich might affect your finances or business affairs, or
those of your employees, you should consult a qualified professional adviser to validate.
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Oct-12 Jan-13 May-13 Aug-13 Nov-13 Mar-14 Jun-14 Sep-14 Dec-14 Apr-15
Kwacha(ZMW)
Exchange Rate Trend USD / ZMW