Africa Oil Plc has five of its stations denied fuel supply by the Ethiopian Petroleum Supply Enterprise (EPSE). The company had requested over a million litres of fuel, but its requests have been unfulfilled.

The four-year-old company has 42 new stations under construction with five completed at a cost of hundreds of millions of Birr, including those in Jemo, Tuludimtu, Jigjiga, and on the road to Arbaminch, according to Ketema Sileshi, general manager at Africa Oil. The lack of fuel supply has rendered these stations idle and the investments are at risk.

"Millions of investments have been left in the air," Sileshi lamented.

His company, operating 92 stations nationwide, had planned to expand its market share and supply underserved regional states with its new stations. However, the current fuel quota system, based on existing stations and transaction volume, has limited his company's supply to 10 million litres less than its monthly demand of 27 million litres. Ketema argues that increasing the number of fuel stations will boost productivity.

"New stations are there to meet the demand, not create more demand," he said.

In a move that has incited outcry and apprehension, EPSE officials have suspended the supply of fuel to new stations. The decision comes as the Enterprise seeks to double down on cutting fuel imports. A letter issued by Esmelealem Mihretu, CEO, comes after a board meeting discussed plans to halt the supply of fuel to new stations awaiting certification and those that are also currently under construction. "It goes against national policy," the letter reads.

Esmelealem noted this comes as the country intends to decrease fuel import expenditure, and transition to electric vehicles, with a reduction of fuel importation by 4pc targeted for the year. He stated that the supplier plans to gradually reduce fuel imports upon economic activity and electric vehicle uptake.

"We have no plans to supply the new stations," he told Fortune. "There is no need for that anymore."

He argued that there should be a priority to sufficiently serve the existing stations.

The federal government has been promoting the adoption of electric vehicles (EVs) to reduce fuel import costs. A ban on importing petroleum-powered vehicles was implemented, and import taxes and duties for EVs were reduced. Imports of EVs have nearly doubled from three years ago, reaching 72 million dollars in 2022/23.

However, uncertainties remain regarding the country's power infrastructure's capacity to handle a rapid transition to EVs. Energy expert Yemanebirhan Kiros notes the current power grid may not be sufficient for the increased demand and cites the transition from biogas to electric cooking as an example that led to overloaded power lines and constant outages. He stated, "There is no sufficient power supply".

Yemanebirhan says the high demand from industries and manufacturing companies to transition to EVs is hindered by the lack of adequate electrical infrastructure. The expert urges the government to implement regulatory overhauls to improve efficiency, increase tariffs to encourage investment from energy companies, and establish legal frameworks. He believes that "ensuring energy efficiency first is crucial." The lack of a regulatory framework also affects issues like electricity tariffs and the standardization of charging equipment. Ketema stated that "it's unthinkable right now," due to the lack of infrastructure. The vast majority of vehicles on Ethiopian roads continue to be petroleum-powered.

Many areas in Ethiopia, including Benishangul Gumuz Regional State, are facing severe shortages. In the Kamashi zone, comprising five districts, there is not even a single fuel station. Though rich in coal, gold, and marble, the zone has relied on fuel supplies from Wollega in Oromia Regional State. Security issues have disrupted this supply chain, limiting the zone to a mere 90,000 litres of petroleum every two months.

"Fuel stations are desperately needed ," said Tariku Kumera, deputy head of the Benishangul Gumuz Trade Bureau. The entire region currently operates with only 16 gas stations in Assosa and Metekel zones, and the supply to these stations has been declining recently. The new fuel supply restrictions could further exacerbate the situation, as eight new stations under construction in the region may now face delays or cancellations. Several investors have already abandoned their projects, while others are complaining to authorities about the fuel shortage.

"The shortage of fuel is affecting investment," he said.

OMA Mining Plc, a joint venture between Ethiopian and Sudanese investors, ceased operations after 12 years due partly to severe fuel shortages in its Guji and Assosa operations. Dereje Demisse, a former operational manager, partly attributed the company's closure to the lack of gas stations and the undependable fuel supply in the region.

Dereje, now managing a marble manufacturing company operating for over three years in Harer Regional State's Mareo district, continues to face fuel shortages. They must travel 70km to another district to acquire 700 litres of petroleum per week.

Kassahun Goffe (PhD), minister for Trade & Regional Integration, recently admitted to a fuel shortage but stated that the government's strategy still focuses on reducing fuel imports. "We need to better administer the existing fuel stations, not add more," he stated.

The Ministry has drafted a proclamation to control illegal practices in the petroleum supply and distribution value chain. The daft law mandates fuel transaction payments to be made digitally. If approved, new distributors will have to have a depot that can store at least half a million litres of petroleum products and four fuel stations to commence operation and should construct additional six fuel stations within three years. Existing distributors will be required to have 10 fuel stations within five years.

The state-owned EPSE serves 1.5 million vehicles across the country, with a daily supply of three million litres of benzene and 8.5 million litres of diesel. The Enterprise has distributed 986,795tn of fuel in the first quarter of this fiscal year.

Research conducted by the Petroleum & Energy Authority (PEA) exposed a critical fuel shortage across the country. The study revealed that 500 districts lack even a single fuel station.

Bekelech Kuma, the Authority's communication head, says that some border areas with Kenya and Somalia have an excessive number of fuel stations, describing them as "lined up like a retail shop." This has facilitated illegal fuel trade across borders, especially considering the higher tariffs imposed by neighbouring countries, according to her. However, due to the ongoing fuel shortage, the Authority has been approving the construction of new gas stations while being wary of opening stations near borders.

While critics have questioned the EPSE's authority to implement such rules, the supplier has defended its position, saying it was a decision made by higherups.

"It's the first time we are reading the letter," Bekelech revealed. She told Fortune that EPSE did not consult with the Authority in making the decision.