Botswana Oil Limited (BOL) is seeking to reduce its reliance on South African fuel intermediaries through a new direct-supply arrangement with Oman’s OQ Trading, a move the state-owned company says will give it greater control over procurement and improve supply reliability.
Letshego Moeng, Chief Strategy and Sustainability Officer at Botswana Oil Limited (BOL), told The Business Weekly & Review that a shipment of approximately 20 million litres of diesel marked the company’s first direct-from-source fuel supply arrangement.
While sourcing fuel directly from Oman could help Botswana diversify its supply sources, the key question by industry players is whether the arrangement offers a cost advantage over traditional supply routes. They say diversification may strengthen supply security, but if the alternative route results in higher procurement and transportation costs, its economic benefits become less clear. The ultimate test is whether the arrangement delivers fuel more competitively without compromising the reliability of supply.
When asked about costs, Moeng declined to disclose further contractual details, citing commercial sensitivity. “It’s a new way of doing things, so it’s still early to talk on, it’s still a sensitive matter, the oil industry is a very commercially sensitive industry,” he said.
Analyst says it could offer structural advantages
Stephen Lecha, an energy analyst at Lecha Group, said sourcing petroleum directly from Oman could offer structural advantages over traditional South African supply arrangements.
“While global oil prices are linked to international benchmarks, this direct bilateral framework bypasses the profit-skimming regional oil marketing intermediaries,” he said.
“It shifts Botswana’s strategy from a passive buyer from SADC-based intermediaries to a proactive infrastructure co-developer in key SADC trade routes,” Lecha added.
The potential savings lie in the costs associated with purchasing and delivering fuel, rather than necessarily in the price of the product itself. Refined petroleum is priced against international benchmarks, leaving Botswana exposed to global price movements regardless of its source.
Direct procurement could, however, reduce intermediary margins, coastal storage charges and handling fees associated with traditional supply arrangements through South African oil companies. Negotiating directly with OQ Trading could also give Botswana Oil greater scope to secure favourable supplier premiums through bulk purchases.
These potential savings must be weighed against the cost of transporting fuel from Oman to southern Africa and then into Botswana. The arrangement shifts some costs associated with South African intermediaries and inland transport towards ocean freight, port handling and inland distribution from regional coastal gateways.
Lecha estimates that physical transport routes can account for between 15 percent and 30 percent of the total landed cost of fuel in a landlocked country such as Botswana, depending on international prices and transport efficiency.
The commercial advantage will therefore depend on whether savings from direct procurement outweigh the additional logistics costs. Although large tankers can reduce maritime transport costs per litre, delays at ports can attract demurrage charges, while inefficient inland transport can erode potential savings.
Direct sourcing creates an opportunity to improve the economics of fuel imports, but the scale of any savings will depend on the supply terms negotiated and the efficiency of the delivery chain.
The arrangement also introduces new risks. Botswana remains exposed to international petroleum prices and potential disruptions to maritime shipping routes, including critical chokepoints such as the Strait of Hormuz.
Moving fuel from Oman through Namibia or Mozambique and then across borders into Botswana will also require efficient coordination of customs procedures, cross-border regulations and road freight infrastructure. Any bottlenecks along the route could undermine the reliability and cost advantages of direct procurement.
Lecha argues that the longer-term benefits will depend on developing the infrastructure needed to support more reliable supplies across the region.
“There is a critical need to commission coastal storage capacity, refined fuel pipelines, and ensure a balanced and sustainable energy mix, not only in Botswana, but in the whole of the SADC region,” he said
The Agreement
The shift comes as international oil companies report persistent shortfalls in fuel volumes supplied by BOL, raising questions about the company’s ability to secure adequate and reliable supplies under the country’s fuel import mandate. BOL said it intended to maintain the supply relationship with OQ Trading, although it did not disclose the duration of the arrangement.
“We have managed to source a vessel from them with a plan to continuously do that. That gives us the reliability to ensure that we know when the product is coming in. We have more control over the product,” Moeng said.
According to Moeng, the arrangement forms part of a broader energy cooperation framework between Botswana and Oman, with the two countries exploring opportunities in petroleum supply, storage infrastructure and regional energy trading.
In November 2025, Botswana Oil and OQ Trading signed an investment cooperation agreement covering technical, commercial and regulatory cooperation, including the evaluation of petroleum supply arrangements. A separate agreement with OQ Group focused on energy infrastructure and the development of potential storage solutions.
In April 2026, the two sides advanced discussions on an integrated petroleum supply and storage platform combining coastal import facilities with inland strategic reserves. The proposed framework is intended to improve supply-chain efficiency and strengthen Botswana’s long-term fuel security.
Moving away from SA suppliers
For decades, Botswana sourced almost all its fuel from South Africa, largely through locally incorporated subsidiaries of international oil companies (IOCs) that drew supplies from refining and trading operations in South Africa and international markets.
According to a position paper by an oil industry association, these companies relied on five South African supply hubs. Most fuel entered Botswana by road tanker, with a smaller proportion transported by rail.
The arrangement exposed Botswana to disruptions in South Africa’s refining and transport infrastructure, including ageing refineries, inadequate investment in new capacity, port and rail congestion, and unreliable rail services. Plans by IOCs to downsize or exit Southern Africa also raised concerns about the continuity of supplies.
The government responded by establishing Botswana Oil as a state-owned enterprise and pursuing the development of strategic fuel storage facilities. In April 2024, it introduced an oil import mandate assigning Botswana Oil responsibility for 90 percent of fuel imports, with the remaining 10 percent reserved for citizen-owned oil companies. The policy was intended to strengthen fuel security, coordinate imports and build strategic reserves.
The Oil Industry Association has argued that the mandate reduced supply diversity, with the number of South African supply hubs available to Botswana falling from five to one after IOCs were excluded from direct importation.
The association identified reliance on Sasol’s Natref refinery and its associated loading infrastructure as a potential single point of failure. It argued that concentrating procurement in BOL had created new supply vulnerabilities rather than eliminating those associated with Botswana’s dependence on South Africa.
Botswana Oil and citizen-owned companies (COCs) have since diversified supply routes through Namibia and Mozambique. Kwa Nokeng, Botswana’s second-largest fuel importer and the country’s largest privately owned, citizen-controlled petroleum distributor, told The Business Weekly & Review that its licence allowed it to import products from regional suppliers, mainly in South Africa, Namibia and Mozambique.
“The Company’s procurement is designed to keep product available at its commercial depots and to supply its business-to-business and mining customers reliably and consistently,” it said.
However, the oil industry association has argued that sourcing through alternative routes increases procurement costs that are not fully covered under the existing fuel-pricing framework. These costs are instead recovered through claims to the National Petroleum Fund.
Supply shortfalls raise the stakes
The Oman arrangement comes as BOL faces scrutiny over its ability to meet demand under the 90 percent import mandate. IOCs have recently reported recurring supply shortfalls that are creating significant operational challenges, particularly when demand exceeds the volumes made available by BOL.
Industry figures indicate that BOL supplied about 70 percent of the volumes nominated by the companies in September 2026, leaving a shortfall of 30 percent. Petrol imports during the month were also 27 percent lower than the average monthly volume recorded between January and August 2026.
The constraints have forced some companies to transport fuel from northern Botswana to the south when products were unavailable at their usual supply points. According to industry representatives, this has pushed transportation costs to as much as four times the normal cost per load.
The companies also estimate that BOL fell short of their nominated volumes by about 20 percent cumulatively during the first year of the import mandate.
