Malawi government officials confirmed that the deal was struck on January 21, 2008 by a Malawi delegation led by Finance Minister Goodall Gondwe, accompanied by Irrigation and Water Development Minister Sidik Mia and Energy and Mines Minister Henry Chimunthu Banda.
The project, which will take will take 36 months to complete, will comprise the pipeline and an oil storage facility that is expected to boost Malawi's reserves to 90 days. Currently, the country can hold only a 10-day reserve.
Banda would not be drawn to disclose the finer details of the agreement.
“Government only said it is funding the process as one way of reducing high costs of fuel importation,” Banda said but would not say how the Mozambican government has been involved in the deal.
Principal Secretary in the Ministry of Energy and Mining, Charles Msosa, said the pipeline would be laid from Beira to Nsanje port because the project is part of the Shire-Zambezi waterway initiative.
Banda said the Malawi government is also interested in developments at Nacala, where the Mozambican government is in the process of building an oil refinery, and he hopes the facility would serve the regional market.
“If this is the case then we will engage the Mozambican government in talks for us to access fuel from them,” he said.
Currently petrol in Malawi is sold at K200.90 (US$1.46) per litre, diesel at K187.60 (US$1.34) per litre and paraffin, which is widely used in rural areas, at K132.20 (US$0.95) per litre.
Banda said this is still on the higher side for the Malawi, which has 65% of its population living below the poverty line where 86% of them live in rural areas.
In order to solve energy problems in this area government says the pipeline will be complementing with the government's rural electrification program.
Government announced last week that Phase 5 of the program would be taking off early next month and it is set to benefit Malawi 27 out of its total 29 districts.
Chief Energy Officer responsible for rural electrification in the ministry, Gideon Nyirongo, said the government is now tendering for procurement of materials for the project.
“The implementation period is nine to 15 months and we should be able to complete the project within this timeframe,” he said.
Through the project, government would be buying electricity transformers from which people could tap electricity, unlike the arrangement currently under practice with the country Electricity Supply Commission (ESCOM) parastatal where customers buy transformers, which are expensive for an average Malawian.
