5 October 2017

Namibia: Fuel Storage Facility to Push Security of Fuel Supply Up

Windhoek — The massive fuel storage facility in Walvis Bay, which was estimated at N$3.7 billion in 2014, is now anticipated to cost the government N$5.2 billion upon its envisaged completion in June 2018.

Once completed, the facility will increase the country's security of fuel supply from the current 7-10 days to 30-45 days and, according to government, the project is on track, with no delays expected before commissioning.

"This is of significant strategic importance and constitutes the critical, underlying strategic reason for the implementation of the project," said Simeon Negumbo, Permanent Secretary in the Ministry of Mines and Energy.

The facility in Walvis Bay will have a total storage capacity of 75 million litres, which will be able to store 5 million litres of Diesel 500 (old diesel), 40 million litres of Diesel 50 (new diesel), 20 million litres of unleaded petrol, five million litres of heavy fuel oil and five million litres of aviation fuel.

However, Negumbo could not specify what it will cost to fill up the storage facility upon completion, noting that this will be dependent on the demand for fuel and the monthly demand required and decided upon in terms of the operation philosophy, operation manuals and the operation and commercial models ultimately adopted by government. "The final cost of the procurement of the fuel will be dependent on the prevailing price of fuel and negotiations with any potential supplier of such fuel," said Negumbo.

Responding to questions from New Era, Negumbo added that the country's current fuel import facilities have far exceeded their design life and, in fact, pose a fire hazard to the entire Port of Walvis Bay. Accordingly, the old facility will be decommissioned by June 2020 and the new facility will be used to store all imported fuel into. As such, the operators, which will likely be NamPort, for the offshore activities and Namcor for the onshore items, will be guaranteed income through the ordinary port and throughput and storage fees applicable to the sector.

"It is similarly also worth noting that the governments of our neighbouring countries, through their state-owned oil companies, have expressed firm interest in making use of the new facilities to service their own domestic demand. The new facility is a critical first step in fulfilling the objective of Namibia becoming a regional logistics hub in accordance with Vision 2030, NDP5 and the Harambee Prosperity Plan," said Negumbo.

Once completed by mid-2018, the new storage facility will be filled to capacity as part of the testing requirements agreed upon with the contractor. Government, or the facilities operator, will be required to procure the fuel to fill up the new facility. At the time of going to print, Namcor, the likely operator of the facility, had not responded to a question on how it plans to finance the procurement of fuel to fill up the facility.

"Storage of fuel and the operations of the facility are dependent on the import thereof. However, for commercial purposes, assuming Namcor (and NamPort) can demonstrate the necessary management and fiduciary capacity to be entrusted with the fuel import mandate, there should be no reason why government would not consider the return of such mandate to Namcor. Ultimately, the decision must be made by government and to date Namcor has not been given such mandate. Government will make a decision on the matter in due course," Negumbo explained.

Boosting fuel supply ... The new fuel storage facility being constructed in Walvis Bay will have a total storage capacity of 75 million litres.


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