Namcor is to invite bids for a partner to manage the Walvis Bay fuel storage facility on its behalf.
18 January 2019 | Energy
Namcor outpaced Vitol, which at one stage was in the driving seat to operate the multibillion-dollar facility.
The facility will store 70 million litres of petroleum products such as petrol, diesel, paraffin and others.
Vitol had offered government a measly US$1 a month to rent the facility for ten years, which was constructed to the tune of N$5.6 billion.
“I confirm that cabinet has awarded the management and operation of the Walvis Bay fuel storage facility to Namcor,” Namcor spokesperson Utaara Hoveka told Namibian Sun.
Hoveka said the parastatal will now advertise a tender to select a company to manage the facility on its behalf.
The tender to select a joint-venture partner will be advertised in the first quarter of the year.
“We will not directly run the facility but will appoint a technical partner that will run the facility for about three years on our behalf,” said Hoveka.
At the end of that period, Hoveka explained, Namcor may elect to have another company manage the facility or they will manage it themselves.
Vitol, whose business case was escalated to cabinet by finance minister Calle Schlettwein, was willing to offer only 30 cubic metres or 30 000 litres of the total 70 000 cubic metres of petroleum storage space at the facility to government for emergency use.
The rest of the storage space, 69 997 cubic metres, would be used by Vitol. This meant that Vitol would use 99.9% of the facility, which was built to store Namibia's strategic petroleum reserves.
Vitol also 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 would hand the Swiss company 45% of the Namibian fuel market, The Namibian reported.
Asked how Namcor was readying itself for the eventual management of the storage facility, Hoveka said a team had been selected and were sent for further training.
“As for the readiness of our employees, we have sent them on training arranged by the ministry of mines and energy to ensure we are ready to run the facility,” he said.
Hoveka added the facility's commissioning in the first half of this year.
The facility, which was initially meant to cost government N$900 million, as well as the introduction of a fuel tariff, saw its construction costs spike astronomically. Against this backdrop, Namibian Sun asked Hoveka where the immediate benefits would come from, given the high costs incurred.
“At the moment the country runs on an extremely limited capacity. This is risky especially during high seasons in the oil market, taking into consideration that Namibia does not yet produce a drop of oil. It is also risky in the case of any unforeseen eventualities, either in South Africa or the oil-producing countries,” Hoveka said, while highlighting the need for the facility.
He added that the facility would make it possible for Namcor to import liquefied petroleum gas or liquefied natural gas - a first for Namibia.
“Namcor will further host other oil companies, thereby generating money through throughput fees related to the jetty and pipeline. Namcor will also no longer incur huge storage costs or a lack of storage in the town of Walvis Bay,” Hoveka said.
Namcor was also banking on using the facility to have its fuel import mandate restored. Namport up until 2010 was responsible for 50% of local fuel needs.
“Namcor will use the facility to effectively deliver on the 50% fuel import mandate, which we have been engaging government on,” Hoveka said.
According to him, Namcor was expectant that government will make a favourable decision regarding the fuel import mandate during the course of the year.