By: Nghiinomenwa-vali Hangala
Data from the regulator of petroleum products shows that Namibia’s annual consumption of refined petroleum products amounts to roughly 1.1 billion litres. Most of which is diesel (70%), and the rest is petrol.
The data came at a time when Namibia’s crude oil discovery was making headlines, with production set for 2030. The country is busy scrambling for oversight power, however, no mention has been made of refining in the national dialogues.
This was presented by Abednego Ekandjo, chief economist in the Ministry of Industries, Mines, and Energy and acting deputy director of the Directorate of Petroleum Affairs, during an engagement with the Namibia Competition Commission.
He explained that Namibia is a net importer of petroleum products and does not partake in any refinery.
“That is, there are currently no oil refineries in Namibia at present. All requirements are imported,” Ekandjo stated, as a reality check that the country’s oil discoveries would have to be sold to nations with refineries and then repurchased.
This cycle would, in turn, continue the current trend of minerals such as copper, gold, uranium, lithium, and marbles extracted and exported in raw form only for consumables such as copper wires, pipes, and wedding rings to be repurchased.
Ekandjo also noted that Namibia fully relies on the privately-owned oil marketing companies (OMCs) as well as the national oil company (NAMCOR) to source petroleum products from the international oil market to meet local demand.
To ensure security of supply, affordability, and availability, the country has the National Energy Policy of 2017 as one of the key guiding documents. The Policy enables security of fuel supply through effective licencing and enforced compliance.
It also ensures affordability of fuel through informed pricing aligned with market dynamics. Lastly, the Policy ensures fuel availability by enabling investments in key infrastructures.
Major OMCs supplying Namibia with refined petroleum products include Puma Energy Namibia, TotalEnergies Namibia, Vivo Energy Namibia, Engen Namibia, and NAMCOR. These OMCs and NAMCOR are members of the Namibian Oil Industry Association (NOIA), which represents the interests of fuel wholesalers.
Following bulk supply from international markets, which is mostly from outside Africa, according to the monthly trade statistics, the petroleum products land at the port of Walvis Bay and are stored in various storage facilities owned by the OMCs.
The country also has a national oil storage facility (NOSF) at Walvis Bay (Marine Oil Tanker Jetty, Petroleum Products Pipelines, and Oil Storage Terminal) with a storage capacity of 75 million litres. All petroleum enters Namibia through the NOSF, which is operated by NAMPORT and NAMCOR.
The bulk fuel is then transported by fuel truckers around the country. Fuel transporters include Northern Fuel Distributors CC, Van Dyk Petroleum, Acer Petroleum Namibia, Oluno Petroleum, Skyway Investment CC, LVW Boerediens, and Du Preez Petroleum, among others.
TransNamib is also involved in said bulk fuel transportation. It is estimated that 12% of all bulk fuel transportation in Namibia is done by rail, according to the Directorate of Petroleum Affairs.
The bulk fuel is distributed to various fuel retailers, where the fuel pump price is controlled by the government through the Directorate of Petroleum Affairs in consultation with retailers to ensure an effective fuel pricing regime.
The fuel price review revolves around the cost recovery principle. In other words, fuel suppliers must recover the full costs involved to ensure business continuity.
The government also has a Slate Account Mechanism that facilitates the cost-recovery principle through the National Energy Fund (NEF) under the direct control of the Minister of Industries, Mines, and Energy.
During fuel price over-recoveries, the difference is forfeited to the NEF by OMCs. Equally, during fuel price under-recoveries, importers/OMCs claim the difference from the NEF. This is to ensure that Namibian fuel consumers are protected against excess profit maximisation by paying a fair price for fuel, according to the acting deputy director.
Moreover, it is to ensure that investors in the local oil market receive a fair return on their investments (through wholesalers’ margin and retailers’ margin). Lastly, to ensure that the government collects statutory levies imposed on the prices of petroleum products in an efficient and effective manner.
There are around 5 levies imposed on the prices of petroleum products that are shared by consumers, dealers, and suppliers.
With the oil discoveries, excitement among Namibians is palpable with the hopes that the production of crude oil may lower the cost of fuel in the country. However, without refining capacity or plans to invest in any, it is expected that benefits may only be reaped if the government uses crude oil revenue to subsidise fuel prices further.
