Petroleum Downstream

Introduction

One of the objectives stated in the Ministry of Mines and Energy's White Paper on Energy Policy is to ensure the security of energy supply to support the growing demand for energy services. Energy supply plays a pivotal role in all developed and developing countries. Namibia has no refinery capacity and therefore imports all her refined products from South Africa through the Walvis Bay harbour and rails in lubricants as well from South African refineries.

Legal Framework controlling participants

Strategic petroleum products (petrol and diesel) are controlled by the following legislation:

Petroleum Products and Energy Act, 1990 (Act 13 of 1990), and the

Petroleum Products and Energy Amendment Act, 1994 (Act 29 of 1994)

Petroleum Products and Energy Amendment Act, 2000

Petroleum Products Regulations, 2000 : Petroleum Products and Energy Amendment Act, 2000


According to these acts prices of the mentioned fuels are controlled, but prices of all other petroleum products are left to be determined by market forces. The retail prices of all petrol grades are gazette at each price adjustment but diesel prices are controlled only at the wholesale level and therefore are not gazette. The government plays no active part in the supply and distribution of petroleum products other than to control prices of petrol and diesel in an effort to enable the private sector to do business beneficial to the country as a whole. Imports are monitored by the Ministry of Mines and Energy while the Ministry of Trade and Industry issues the necessary import permits. A process towards de-regulation of the downstream petroleum sector has already started with the abolishment of the RATPLAN, the amendment of the Petroleum Products and Energy Act, the drafting of the downstream petroleum regulations and so on.


The Petroleum Products and Energy Amendment Act, 2000 amend the Petroleum Products and Energy Act, 1990, so as to grant more comprehensive powers to the Minister of Mines and Energy to make regulations ( Petroleum Products Regulations, 2000 ), more particularly relating to the import, supply, storage, possession and sale of petroleum products, the licensing of and conducting of business by wholesalers, resellers and consumer installation operators , the application of health, hygiene, safety and environmental standards and requirements, and minimum specifications as regards standards of facilities, structures and equipment and restrictions on the sale and use of petroleum products; to provide for reasonable and just contractual rules and principles in the petroleum industry; to provide for increased penalties for contravention in certain cases of the regulations and the Act; and to provide for incidental matters.

The Stakeholders / Major Players

The National Oil Company, NAMCOR, controls the exploration activities for oil and gas upstream by way of a bidding process while the international oil companies do the actual exploration. The Namibian government through the Ministry of Mines and Energy facilitates a privately run downstream oil business. At the moment there are five oil companies involved in the marketing of petroleum products in Namibia:

  • BP Namibia Limited
  • Caltex Oil (Namibia) (Pty) Ltd
  • Engen Namibia (Pty) Ltd
  • Shell Namibia Limited and
  • Total Namibia (Pty) Ltd

Price Adjustment Mechanism

A new fuel pricing mechanism of quarterly price adjustments was introduced from 1 January 1997. This quarterly fuel price review responds more efficiently to market changes and eliminates the subsidies that over the past years have been paid out of the National Energy Fund (NEF) towards an affordable fuel price country-wide. The In-Bond Landed Cost (IBLC), based on a basket of posted and spot prices is used to calculate the quarterly fuel price and the monthly 'Slate' unit over/underrecoveries. The objective of price adjustments is to adjust the price in such a manner that the monthly unit over/underrecoveries incurred during the previous quarter are cleared and that the Namibian Dollar value of the cumulative 'Slate' balances at the end of the previous quarter are kept within the predetermined level of N$3 million.

Fuel Price Subsidy to Remote Areas

Essentially, there is one fuel price country-wide, which is the Walvis Bay price. Added to it is first the cost of delivering the product by rail to the eleven inland depot towns (Windhoek, Okahandja, Tsumeb, Keetmanshoop, Mariental, Grootfontein, Otjiwarongo, Karasburg, Otavi, Gobabis, Outjo). Then the cost of road delivery from the depot towns to the respective destinations is added which may vary considerably from about 5 cents per kilometer to 16 cents per kilometer as it is a function of distance, quantity and type of contractor. Claims on actual road deliveries are submitted by the oil companies to the Ministry of Mines and Energy for reimbursement within 14 days of such claims being received. Quarterly audit certificates on the claims are provided. All towns and localities supplied directly by road from Walvis Bay are excluded from the subsidy, as they do not incur the rail costs that other localities have to bear.