An acrimonious relationship has developed between Finance minister Calle Schlettwein and the Ministry of Mines and Energy minister Tom Alweendo over whether or not to give Vitol Group the management rights of the multibillion-dollar Strategic Oil Storage Facility in Walvis Bay, The Patriot has learnt.
Highly-placed government sources said the dispute involved intensive discussions between the two ministers on Wednesday last week at the Ministry of Finance headquarters and it is understood that Schlettwein raised several issues that did not sit well with Alweendo.
During the meeting, Schlettwein allegedly proposed that Vitol should be given the mandate to manage the facility because they[Vitol] have the financial capacity, technical skills and the ability to transfer skills to Namibians. Schlettwein allegedly also proposed that a special committee rather than the Procurement Board should be established to deal with the matter.
Critics have since questioned why government is not making use of the Central Procurement Board to select the suitable bidder.
It is said Schlettwein remains reluctant to risk the successful implementation and operation of the N$5.6 billion facility.
“Alweendo finds himself in the same situation his predecessor Obeth Kandjoze was in. Remember how Kandjoze was moved because he opposed the Vitol proposal,” said a source.
It is believed that Alweendo felt Schlettwein was going against a cabinet decision to run a transparent and competitive bidding process. In March 2018, Alweendo confirmed that the National Petroleum Corporation of Namibia (Namcor) would indeed manage the facility. He said this during a press conference held within days after his appointment as Minister of Mines.
Schlettwein in the past clashed with cabinet colleagues Obeth Kandjoze(then mines minister) and Sakeus Shanghala(then attorney general) after he took an unsolicited proposal from Vitol to Cabinet. The two cautioned him to refrain from entertaining unsolicited proposals. Critics at the time questioned Schlettwein’s motive to take the proposal to Cabinet while no public bidding has been done.
The meeting, The Patriot understands, ended on a sour note.
It is understood that Cabinet had in the past decided that Namport and Namcor should operate the facility and procure capacity where technical support was required.
Vitol have shown interest in managing the storage facility as well as import fuel to Namibia. According to our sources this constitutes a serious conflict of interest as that would render Vitol effectively with monopolistic status as they would set the price of fuel for the Namibian market and store it at the same time. In a strange twist of events a very aggresive minister Kandjoze appeared to have changed sides and is now alleged to be in support of the Minister of Finance’s stance which has recommended that another body other than the Central Procurement Board should be responsible to decide on the partner for the oil storage project.
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.
Alweendo vowed during an interview with this publication that the management contract of the facility will be clear as daylight.
Alweendo said at the time that 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 back then.
Much of the criticism related to the project 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 Vitol proposal
Vitol, 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 Energy 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 leas 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 000cbm 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.” 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.”