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Monday 22 April 2019
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Oil storage in turmoil

As expected, the scramble to land the mandate to manage the lucrative multi-billion dollar national oil storage facility is in full throttle.
Apart from state policies that government has to follow to get the project running, political meddling is another type of involvement foreign players use in promoting their interests.
Claims of conspiracies involving ministers are making rounds while other well-connected politicians are said to be proxies of large multinational firms looking to manage the strategic facility which is due for completion in June. During the conceptualization phase of the project, government’s stance was that the state oil firm Namcor would run the affairs of the company. Recent developments however suggest otherwise.
National purse manager Calle Schlettwein, who took an unsolicited proposal from a European firm that’s eyeing to manage the facility to cabinet, has been cautioned by two of his cabinet colleagues to refrain from entertaining unsolicited proposals.
As expected, critics questioned Schlettwein’s motive to take the proposal to Cabinet while no public bidding has been solicited.

 
Former Attorney General Sakeus Shanghala, now justice Minister, opposed the bid submitted by Vitol SA.
His cabinet counterpart Obeth Kandjoze who has since been moved from the Mines Ministry to head the economic planning affairs of the country also opposed the bid.
The proposal and the contents therein was not met well by the then attorney general Sakeus Shanghala and former Minister of Mines and Energy Obeth Kandjoze.
Kandjoze warned Schlettwein that the proposals made by Vitol are against government’s initial plans for the facility.
Shanghala on the other hand feels that the fact that the proposal is unsolicited raises questions regarding the fairness and transparency of the move.
In a letter written to Kandjoze on 7 February 2018 regarding the Vitol proposal, Shanghala said: “Questions as to its source, the surrounding circumstances and the events leading to its submission and consideration may compromise government and cabinet.”
Shanghala told Kandjoze that the unsolicited proposal has no legal standing and should therefore not be “entertained further, much less directly at Cabinet level, and more so, not by the Minister of Finance for his held positions on public procurement.”
Shanghala this week confirmed writing the letter to Kandjoze. He however refused to discuss its contents.
“The letter you are referring to is confidential, therefore I cannot discuss it with you,” he said.

 
The Namibian last week quoted a letter reportedly written by Kandjoze during his time as the Minister of Mines and Energy in which he stated that “Saddling the public with the cost of the project and privatising the profits should be avoided.
The proposal appears to push such an agenda in the introduction, to which I do not subscribe,” he stated.
His concern was mostly that the government is partly privatising a facility which was constructed with N$5,6 billion of taxpayers’ money.
“Please allow me to reiterate my concerns concerning the need for all interested parties to be treated equally, and the process to be conducted in an accountable and transparent manner,” Kandjoze added.
The former mines minister, according to the report, said Vitol SA is not the only interested company, nor are they the only company capable of managing the storage facility.
“A competitive process will undoubtedly prove more favourable in ensuring the maximum possible benefits to the government,” Kandjoze reasoned.
The custodian Ministry-Mines and Energy-this week said a decision on the modalities around the management of the facility and the possibility public private partnerships are yet to be concluded by the inter-ministerial committee that has been set up.
Since independence, politicians have played a central role as far as awarding colossal tenders is concerned.

 
In most cases the jostling for tenders by ministers, who act as proxies for bigger firms, is the primary reason why national projects have been delayed.
Mines minister Tom Alweendo vowed that the management contract of the facility will be clear as daylight.
Alweendo this week said public bidding will be the order of the day and urged those that have already started to lobby to do so in a coherent manner.
“I do not know who is spreading information that government has appointed a private company to manage the facility, I can state openly that nothing has been awarded. The public will be notified when we are ready,” said Alweendo.
Alweendo, who has been in his new job for just more than two weeks after three years as economic planning minister, could find himself on a collision course with Treasury depending the veracity of claims made against Schlettwein.
Much of the criticism levelled is based on the narrative about who is going to win the tender to manage the facility, which is none of Alweendo’s concern because “if there is any procurement that is going to be done, the Namibian laws are going to be followed”.
The oil storage facility cost government over N$5.5 billion to construct.
The input cost could balloon significantly when the cost to operationalize the facility is included.
Economists and observers from across the spectrum say the country’s struggling economy will not afford the additional costs and the country will therefore be forced to enter into a PPP.

The Vitol proposal
Vitol SA, an international supplier of crude oil and oil products, is one of the companies that has approached government with a proposal for the strategic storage of petroleum products and commercialisation of the product.
Vivo Namibia is an affiliate of Vitol.
The oil firm, in its proposal seen by The Patriot, says the proposal aims to meet the key strategic objectives of government by drawing on the commercial aspects of the terminal to generate revenue flow for government.
“Government has the need to ensure that certain quantities of petroleum products are held in the terminal for the purposes of Namibia’s strategic storage requirements and for availability in times of national emergency,” indicates Vitol’s proposal.
The firm said it is able to supply the required products and that it is prepared to facilitate the operation and management of the terminal on government’s behalf.
Vitol also vowed to stock up the balance of the terminal with oil at zero outlay for government.
It also promised to build capacity in partnership with Namcor to develop and grow Walvis Bay as the regional supply hub for countries such as Botswana, Zambia, Zimbabwe and Angola.
Vitol proposed a 10-year lease agreement, while at the same time also indicating that the two parties can discuss longer term periods of 15 to 20 years “to generate additional, assured revenue for government”.
In the proposal, Vitol set the lease price at US$1 per annum.

 
“30cbm of the terminal capacity will be reserved for the storage of SS Products.
The balance of the terminal capacity may be used by Vitol for its business needs,” reads the proposal.
The firm also promised to deliver approximately 19 000 cbm of diesel and 12 700 cbm of unleaded petrol meeting local specifications.
“The same quantity of SS Products will be retained at all times in the terminal for Namibian strategic storage needs.
Government may, in the event of a national emergency at any time during the term, call on Vitol to release some or all SS Products from the terminal for government’s or its nominees’ use, at which point Vitol will release from the terminal such SS Product as required by government up to the SS Products quantity at no cost to government,” the proposal states.
Should government accept Vitol’s proposal, the national price for the SS Products will be US$588.2 per cubic meter for gas oil and US$511 per cubic meter for gasoline.
Vitol said government will not be obliged to pay for the SS Products provided the full term of the terminal lease has been completed.

 
“In the event that government draws down from the initial quantity of SS Products and wishes to replenish the strategic stock, the government may purchase from Vitol at prices.”
Regarding the option to extend the agreement, Vitol wants government to grant it a last-look option to extend the term of the arrangement at the market price at the end of the term if government intends to continue.
One of the conditions of the contract, according to Vitol’s proposal, is that Vitol continues for the duration of the terminal lease to be the 100% supplier of all of its affiliate, Vivo Namibia’s, system requirements to supply its Shell Namibia downstream network.
“Any mandate granted to Namcor or other government designated entity for the import of the product would not apply to Vitol/Vivo/Shell downstream business for the duration of the terminal lease.”




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