/ 31 March 2008

Zambia ends oil-financing talks with Standard Bank

Zambia has ended talks with a unit of Standard Bank after failing to agree conditions for a $1,2-billion oil-financing deal, Energy Minister Kenneth Konga said on Monday.

Konga said negotiations with Stanbic Bank Zambia, a subsidiary of Standard Bank, had ended and the government would soon start talks with another bank to finance the purchase of 1,5-million tonnes of crude oil for the mineral-rich Southern African country.

”The government decided to terminate the negotiations because we were not making progress,” he said. ”We had been negotiating with Stanbic Bank from January and we could not continue to negotiate in perpetuity.”

Konga did not give reasons for the decision, but a senior government official told Reuters that the talks had collapsed after Stanbic Bank insisted on collateral despite having earlier softened on the condition. He did not specify what form of collateral the bank wanted.

Earlier in March, energy permanent secretary Peter Mumba said the government would sign the oil-financing deal with Stanbic Bank after the bank relaxed the ”tough conditions” it had set before signing the deal.

”We are now waiting for the [state-run] national tender board to advise us which bank to start fresh negotiations with,” Konga said, adding the new process would not affect delivery of crude oil.

An energy source told Reuters the government negotiating committee was due to start talks with Finance Bank, a local commercial bank.

Zambia has had no financier for its oil procurement since French oil major Total, which owns the country’s sole Indeni Oil Refinery on a 50-50 basis with the government, stopped paying for oil imports in July 2007 after differences with the government over pricing of petroleum products.

The government chose Kuwait’s International Petroleum Group last November to supply nearly 1,5-million tonnes of crude oil for two years.

The first 90 000 tonnes shipment of crude oil worth $75-million was financed by the pan-African government-owned PTA Bank, due to delays in concluding negotiations with Stanbic.

Zambia uses huge amounts of diesel to run its vast copper mines, the country’s economic lifeblood. — Reuters