Namcor weighs fuel supply options

THE National Petroleum Corporation of Namibia (Namcor) has extended its supply agreement with Afroneft for three months, to the end of March this year.

Afroneft, an associate company of the UK-based fuel company Glencore, won the one-year tender in December 2007 to supply fuel to Namcor, which has the mandate to deliver half of Namibia’s fuel requirements.
During the course of this contract, Afroneft deliveries experienced a number of problems, with the country’s other five petroleum companies – BP, Caltex, Engen, Shell and Total – rejecting consignments of fuel of several Afroneft deliveries.
Sam Beukes, Managing Director of Namcor, said the extension of the tender was decided in November last year, and ratified by the Board of Directors in December, to give the company additional time to weigh its options.
Asked when the tender would be re-advertised, Beukes said Namcor was weighing another option – sourcing its own fuel – before deciding to advertise a tender at all.
‘Between now and March, we will be looking at the specifics of the various options, and building a model upon which to operate for the future.’
He said Namcor International, the company’s trading company, had been established with the prospect of sourcing fuel products directly, and that potential suppliers in the Middle East, India and Malaysia were being explored.
‘This option would, however, depend on whether we can assume the risk associated. If not, then the method we have been using [tendering for fuel supply] would continue to be used,’ he said.
‘Sourcing fuel directly requires significant financing. Namcor currently has a thin balance sheet, and we are highly dependent on credit lines (45 – 60 days) with our suppliers. With direct sourcing, finance terms are much more stringent (with credit lines of up to 30 days only), and so this option would be dependent on having sufficient working capital.’
Beukes added that the company is in talks with its shareholder – the Government – to look at securing better financing, including possibly getting a joint-venture partner.
He emphasised, however, that all options are currently under discussion.
Asked whether any changes in tender requirements could be expected should the tender route be taken, Beukes said it was difficult to say at this point.
‘If changes are made, it would be to ensure that the tender is more prescriptive than reactive. Suppliers would have to play by Namcor’s own rules,’ he said, adding that an announcement on the decided route can be expected by next month.
In the future, Namcor also foresees ownership of storage facilities, penetration of commercial and retail markets and expansion into the export market in the sub-region, as part of its downstream activities.
A tender for the construction of fuel-storage facilities at Walvis Bay – expected to cost N$700 million – has already been advertised, and five or six companies have been shortlisted.
The final selection from the shortlisted companies has been placed on hold until the final allocation of land to Namcor.