Oil storage land price inflated

namcorThe National Petroleum Corporation of Namibia (Namcor) board, at the behest of the Ministry of Mines and Energy, is allegedly pushing ahead with a deal to buy additional land for the National Oil Storage Facility in Walvis Bay, despite the owners of the land asking a massively inflated price.
The owners of the land, China Harbour Engineering Company (CHEC) through a special purpose entity – JTC Properties - have been accused of playing judge, jury and executioner, after recommending that Namcor should buy an additional 5,000 square metres of land for the oil storage facility, while they are also responsible for its design and construction.
The land in question has been offered to Namcor for N$23,3 million, a price that is more than double the market value of N$9,8 million, according to an independent evaluation carried out in October last year.
Interestingly, China Harbour Engineering Company bought the land, which is adjacent to Erf no. 5042, where the National Oil Storage Facility is being built, in November 2014, just over a month after the company had been awarded a contract for the design, execution and completion of the project.
This is despite a previous design engineering company saying that additional land was not required for the project.
The Windhoek Observer understands that the Namcor board and the Ministry of Mines and Energy have been pressurising the Namcor management to go ahead with the purchase of the additional land, despite the price concerns, and even as the national oil company has made it clear that it does not have enough funds for the purchase.
In addition, company executives have written to the board expressing their concerns on why they should be made to buy the additional land for a project, whose ownership has not been made clear.
They argued that the National Energy Fund would be better suited to fund the acquisition of the additional land instead.
The Windhoek Observer is in possession of a submission to the Namcor board, dated 7 December 2016, by the parastatal’s Executive: Business Support Property Management and Projects, Nestor Sheefeni, in which he indicated that there is no allocation in the current budget to acquire the land in question for N$23,3 million.
“There was a budget provision made in the 2015/2016 financial year of N$12 million for the additional land for the National Oil Storage Facility. However, in the 2016/2017 financial year there was no provision made in the budget to buy more land for this project.
“If we are to proceed to buy the additional land, the board will have to find another N$11,339,665 outside the current budget,” Sheefeni wrote.
“Our humble recommendation is that the National Energy Fund is better suited to fund the acquisition of additional land... [because] Namcor has no funds budgeted for this expense [and] Namcor’s role with regard to the operation and management or ownership of the facilities is still not clear.”
Namcor sources told the Windhoek Observer this week that what is ironic is that the new board has refused to buy another piece of land in Windhoek for the construction of a Bulk Fuel Storage Facility, even when the property is being offered below the market price by the Shali Group.
Without giving names, the Namcor sources said that a lot of people are benefiting from the construction of the National Oil Storage Facility, whose cost has ballooned from the initial N$900 million to N$4,5 billion at present.
“What is happening now is that CHEC has told Namcor that they need an additional 5,000 square metres of land, because what is provided by Namcor is suddenly not enough.
“Prior to coming to Government and Namcor with this deal, they had strategically placed themselves, by purchasing this piece of land that they are now offering to Namcor,” one source said.
The source further said that according to the initial tender specifications, provided by the previous design engineering company, Burmeister & Partners, the current land where the oil storage facility is being built was said to be enough.
The source added that the new Namcor board, chaired by prominent lawyer, Patrick Kauta, has recommended that the NEF writes off a N$50 million debt that it is owed by Namcor as an “inducement” for management to buy a portion of Erf 3315 (the Chinese land) at the inflated price.
According to an Environmental Impact Assessment study for the National Oil Storage Facility, it will have a throughput capacity of at least 520,000m³/yr.
Sources, however, said comparable projects in South Africa cost way less.
Media reports in South Africa revealed that a joint venture between Thebe Investment Corporation, broad-based black economic empowerment company Jicaro and Rotterdam-based international terminal operator VTTI, is constructing an independently-owned fuel storage facility in the Western Cape with a throughput of up to 805,000 m³/year, at a cost of R650 million, which is a fraction of the cost of the facility in Walvis Bay.
Questions sent to the Permanent Secretary in the Ministry of Mines and Energy, Simeon Negumbo, Namcor Chairperson, Kauta, and the Minister of Finance, Calle Schlettwein, remained unanswered at the time of going to print.