Namcor oil storage report exposes shortcomings

08 October 2021 | Energy

Windhoek ∙ [email protected]

A due diligence report sanctioned by the National Petroleum Corporation of Namibia (Namcor) as well as sensitive ministerial correspondence into the state of the National Oil Storage Facility have given insight into how government scrambled to rectify botched designs and poor workmanship at the facility.

Documents seen by Namibian Sun indicate that the initial project design lacked key structural components such as an internal firefighting system, dedicated jet fuel line, municipal sewage and water reroute, substation at tank farm as well as other critical components to enable the facility to operate optimally.

These, amongst others, ended pushing up the project price from N$3.7 billion to N$5.6 billion.

Government mainly blamed the price escalation on currency fluctuations, initially projected at over N$955 million, but other factors such as the design flaws hardly saw the light of day.

The leaked 2020 report titled ‘Technical Due Diligence and Risk Assessment Report for the Takeover of the Management of the National Oil Storage Facility’ was sanctioned by Namcor to ensure that the facility indeed met global standards to prevent any possible issues that might place the company at risk once it takes over the facility.

The mines and energy ministry, however, said it will not take the blame for the ‘botched’ oil storage designs that were picked up at a later stage, despite prior explicit warnings from industry players that the designs were not in line with international standards.

Bending over backwards

Correspondences seen by Namibian Sun also indicate that the mines ministry lobbied the Central Procurement Board of Namibia (CPBN) to increase the project cost.

The leadership of the board allegedly had to bend over backwards to approve the N$1.9 billion increase.

Mines ministry executive director Simeon Negumbo on 24 July 2017 wrote to CPBN head Patrick Swartz requesting approval to increase the project cost to cater for variation costs, currency fluctuations as well as delayed claims and interest charges.

The increment was to cater for an internal firefighting system (N$115 million), dedicated jet fuel A1 line (N$105 million), municipal sewage and water reroute (N$4.5 million), substation at tank farm (N$4.1 million), substation at onshore station (N$2.8 million), purchase of 5 187 square metres of land (N$24 million) and currency exchange fluctuations (N$687 million).

Negumbo said the contractor had to be paid N$199 million because “government was unable to pay the contractor for six months” during 2016.

A further N$24 million in interest payments had to be paid due to the delay.

Swartz responded to Negumbo three days later granting the request.

He also approved the projected foreign fluctuation of over N$955 million.

An incorporated joint venture between China Harbour Engineering Company, the Roads Contractor Company and Babyface Civils was the contractor.

Om’kumoh AIJ was the consultant representing government.

As expected, Namcor’s fears were confirmed when investigators discovered design flaws and poor workmanship.

The report also found electrical equipment installation flaws, poor installation of cables, no back-up generator at the terminal, corrosion of sensitive equipment as well as lack of essential amenities, amongst others.

Changes explained away

Negumbo last week defended the cost escalations, saying decisions were not taken in isolation and that key stakeholders such as Namcor and the CPBN were consulted.

“The project fell under the authority of an inter-ministerial steering committee under which an inter-ministerial technical committee falls and under which an internal steering committee also fell. Decisions relating to additional cost or related items are then cascaded through the legal systems, processes and institutions for final decision-making through the CPBN,” he said.

“The terms of reference in the tender were primarily provided by the end-users. Namcor and the Namibia Ports Authority, as the end-users, conducted the feasibility studies for each of their respective sections,” he added.

Regarding the internal firefighting system, Negumbo said it had to be altered from a fresh water firefighting system to a seawater firefighting system as the municipality was unable to meet the demand for fresh water in the event of a fire.

As for the alteration of the A1 fuel pipeline, Negumbo said Namcor had indicated that they would use a combined line for diesel and jet fuel.

“However, during construction, the end-user expressed a preference for a dedicated line in accordance with international best practices and to mitigate any risk with such a sensitive product such as jet fuel. This necessitated the variation,” he said.

Meanwhile, explaining the need to acquire more land, Negumbo said the ministry opted to purchase additional land to enhance the functionality and user-friendliness of the facility - particularly with respect to the turning of large trucks.

With regard to the planned rerouting of municipal services, he said: “Some services that were present underground were not shown on the municipal plans and therefore the rerouting of services had to be done and was an unforeseen event that the contractor had to be compensated for.”

Government earlier this year handed the facility over to Namcor to operate and maintain it.

Similar News

 

Namibia aims to become hydrogen superpower

3 weeks ago - 06 January 2022 | Energy

Johannesburg ∙ Elna Schultz "So now finally, we're on the map," says Philip Balhoa about Lüderitz, a town in southern Namibia, where harsh desert meets...

Fuel prices for January 2022 unchanged

4 weeks ago - 30 December 2021 | Energy

The petrol pump prices in Walvis Bay (port of entry) will remain N$15.68 per litre and the price of diesel will remain NS15.68 per litre....

Namibia’s hopes to strike oil renewed

4 weeks ago - 29 December 2021 | Energy

Swakopmund ∙ [email protected] Shell oil and gas company started drilling offshore Namibia on 8 December.The latest exploration exercise once again raised hopes that Namibia...

BESS to reduce major renewable energy expansion challenges

1 month - 18 December 2021 | Energy

A bilateral cooperation agreement between the Republic of Namibia and the Federal Republic of Germany through the KfW Development Bank has yielded a grant of...

Fuel price to increase with 70 c/l in December...

2 months ago - 26 November 2021 | Energy

Andreas Simon the senior public relations officer of the ministry of Mines and Energy, announced that the ministry had completed the fuel price review for...

Petrol, diesel prices rise again

2 months ago - 29 October 2021 | Energy

The Ministry of Mines and Energy announced that the price of petrol will increase by 50 cents per litre and that of diesel by 70...

Fuel price increase could promote smuggling

3 months ago - 05 October 2021 | Energy

Windhoek ∙ [email protected] After the Ministry of Mines and Energy announced that fuel prices will increase by 30 cents per litre (c/l), people expressed...

Namcor oil storage report exposes shortcomings

3 months ago - 04 October 2021 | Energy

Windhoek ∙ [email protected] A due diligence report sanctioned by the National Petroleum Corporation of Namibia (Namcor) as well as sensitive ministerial correspondence into the...

Erongo RED explains tariff increase, resolutions taken

4 months ago - 16 September 2021 | Energy

Walvis Bay • [email protected] An electricity tariff increase of 1.7% has been in effect from July 2021 and runs until June 2022. More...

Fuel prices on the up

4 months ago - 30 August 2021 | Energy

The price of fuel will increase by 60 cents per litre for petrol and 30 cents per litre for diesel on Wednesday (1 September).According to...

Latest News

Namibia drops on corruption index

18 hours ago | Local News

Windhoek ∙ [email protected] Namibia has been ranked 58 out of 180 countries by Transparency International, the leading civil society organisation fighting corruption worldwide, on...

Two-year pandemic exposes vast schisms...

18 hours ago | Local News

Windhoek • [email protected] Nearly two years after the World Health Organisation first sounded the alarm about a novel coronavirus outbreak spreading across the globe,...

Don’t bank on oil yet

18 hours ago | Business

Windhoek ∙ Jo-Maré Duddy No commercial discovery of oil has yet been made in the Graff-1 exploration well offshore Namibia in the Petroleum Exploration...

Safety audit underway after freak...

18 hours ago | Accidents

Walvis Bay • [email protected] A full internal investigation has been launched by Erongo Marine Enterprises (EME) after a freak accident that claimed the life...

Forensic analyst says THC is...

20 hours ago | Crime

Swakopmund • [email protected] The state’s last witness in the ongoing trial of Swakopmund resident Cheryl Green (59), in which she is facing charges...

Highly contagious bird flu confirmed...

1 day - 27 January 2022 | Environment

Swakopmund • [email protected] The suspicious deaths of Cape cormorants along the coast between Walvis Bay and Swakopmund about two weeks ago is caused...

NAMFISA cautions the public on...

2 days ago - 26 January 2022 | Business

The Namibia Financial Institution Supervisory Institutions (NAMFISA) is cautioning the public on microlenders retaining possession of bank cards and PIN codes, original identification documents, original...

MTC completes 271 houses in...

2 days ago - 26 January 2022 | Infrastructure

Breaking the archaic patriarchal status-quo on land ownership, 75% of the 271 houses built by the Mobile Telecommunications Company (MTC) were awarded to low-income earning...

Namport welcomes new executive for...

2 days ago - 26 January 2022 | Infrastructure

Walvis Bay The Namibian Ports Authority (Namport) announced the appointment of Richard Mutonga Ibwima as the new executive for port operations from 17 January 2022....

Load More