Fuel storage scramble

Despite an offer from a Swiss firm, which includes N$160 million in rental fees for ten years, Namcor is positive it will be handed the reins to manage the controversial Walvis Bay bulk fuel-storage facility.

07 March 2018 | Energy

The National Petroleum Corporation of Namibia (Namcor) is positive that it will be chosen to manage the strategic fuel-storage facility once it is completed, although talks with government are still ongoing.

Namcor spokesperson Utaara Hoveka said although no official confirmation had been given that the national oil company would be mandated to manage the fuel-storage facility, discussions held with the government were progressing.

“High-level engagements between Namcor and the Ministry of Mines and Energy on the bulk fuel project are ongoing. Discussions have been largely fruitful, although nothing has been concluded yet,” Hoveka said upon enquiry. He said although there had been talk that the national oil company was poised to operate the facility, Namcor was still waiting to be briefed on whether it would play a role. “There has not been any official communication from government to Namcor regarding the management of the facility. Namcor, however, is represented on the facility's steering committee,” Hoveka said.

The ministry asked for more time before providing an update on the construction and management of the facility. Vitol SA submitted a proposal to finance minister Calle Schlettwein last year, who then submitted it to cabinet for discussion, according to The Namibian.

The Swiss company is alleged to have offered the government US$1 per annum and an additional N$160 million to rent the storage facility for ten years. Vitol promised to supply 19 000 cubic metres of diesel and 12 700 cubic metres of unleaded petrol to Namibian fuel stations, a proposal described by a source as a move that could hand the Swiss company 45% of the Namibian fuel market.

The offer also states that the government would have to buy petroleum products at market prices from its storage facility.

Vitol spokesperson Andrea Schlaepfer denied claims that their offer was “peanuts”.

“Any proposal made by Vitol would be in line with current commercial arrangements. In case this is unclear, this means in line with what is currently charged for the same service by other storage companies,” she said.

Schlaepfer said Vitol was committed to following due process, as directed by the relevant authorities, and had done so in this instance.

“The process is completely open and other parties are able to put forward alternative proposals,” she said.

Once completed, the fuel storage facility will increase Namibia's storage capacity to 30 days, up from the current 14 days, according to Namcor.

The costs associated with the construction of the fuel storage facility skyrocketed from N$780 million in 2008 to N$5.6 billion in 2016, drawing the ire of the government.

The escalation was attributed to a lack of exchange risk insurance taken out by ministry of finance officials, a delay in appointing a contractor and a delay in payment made to the successful contractor, it was earlier reported.

The permanent secretary in the ministry of finance, Ericah Shafudah, former permanent secretary in the National Planning Commission Leevi Hungamo and chief legal advisor in the attorney-general's office Chris Nghaamwa were blamed for the blunders.

Bearing the brunt of the government's anger, Shafudah was given a final warning while Nghaamwa and Hungamo were exonerated.

Shafudah's warning stemmed from her alleged failure to attend technical committee meetings, which created the impression that the government would be able to foot the bill for the construction of the facility regardless of escalations caused by exchange rate fluctuations.

OGONE TLHAGE

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