WINDHOEK - The first-ever service station belonging to the National Petroleum Corporation of Namibia (NAMCOR) should have become operational by December 2013 already but due to logistical challenges the organization has now set the anticipated date for the milestone venture into the downstream sub-sector by end of June 2015.
In fact, NAMCOR has already received land at the Hosea Kutako International Airport where the very first flagship service station, constituting an investment of N$12 million and bearing the NAMCOR flag, will be established. "There might be a bit of a delay but I think we should apply ourselves to deliver this," said NAMCOR's Managing Director, Obeth Kandjoze.
During an exclusive interview with New Era on Friday, Kandjoze explained that NAMCOR is finalizing a business plan and analysis study, being conducted by PwC in Cape Town, to come up with a precise plan on how to establish depots and detailed legislation to distribute fuel throughout the country. "That is a major expectation out of a plan we initiated last year to just look at the bottom line potential of each of the downstream subsections, including 50 percent import, bulk storage as a holding facility, depots and our logistics in fuel distribution and certainly service stations," remarked Kandjoze. The study, that will be submitted to government for final approval, will also determine if each of the intended NAMCOR service stations will be able to operate as viable, stand-alone business case.
The NAMCOR MD elaborated on his organization's approach to service stations, saying that the buying power in an area will determine the type of structure or facility to invest in. He noted that instead of following the typical franchisee type approach, knowing that cost is a consideration, NAMCOR has classified many different types of models of service stations depending on whether the buying power in a specific area can afford the proposed infrastructure. "So, in conjunction with government, we are considering anything from the top facility service station that caters to a large population to the small village service station that maybe need something totaling different, like a canopy and two pumps where people can get fuel. This would range from an investment of N$30 million facility to a N$750 000 facility. So we are developing a cluster of franchisee models that will be directly linked to buying power," noted Kandjoze.
"NAMCOR needs to improve profitability especially in the downstream sector. We are a perennial business in the sense that the majors have remained very dominant in the business. That profitability needs to look at the essence and effectiveness of how we do business. We need to consider investment in infrastructure that will enable us to use that infrastructure as springboards into new opportunities," said Kandjoze.
"We need to encapsulate NAMCOR in a manner that it becomes a world-class organization. That's part of part of our vision. World-class means we must strive to be a BP, Shell, Exxon type company. It's a long-shot but its a dream well-worth having today because that guides our direction in wanting attain that sort of participation."
Consistent growing commercial demand in Namibia has been identified by NAMCOR as a potential opportunity to grow its downstream revenues. Growth in domestic demand for petroleum products has resulted in strong historic and forecasted growth in commercial and retail sales. Total distribution of petroleum product volumes are expected to grow by approximately 4.6 percent per annum until at least 2018. This demand is driven by growth in a number of key areas, including manufacturing and mining, with the recent opening of a number of new mines.
According to NAMCOR's Interim Strategic Plan (April 2013) the organization's participation in distribution and marketing can increase security of supply as well as present the visible participation of a national player to provide a stable revenue stream. Furthermore, NAMCOR says it will be ideally positioned to supply areas considered uneconomic by major private sector players to provide reliable fuel services to undeserved areas.
Commenting on the oil price of below US$50 per barrel, compared to a year ago of US$115 per barrel, Kandjoze said this has serious implications for the oil and gas industry throughout the world. "A year ago break even would have been around US$90 per barrel and with this oil price of below US$50 means that profits or break-even is now so affected to the extent that you have to review your expenditure framework, your employment outlook and all the rest of that because that money is no longer there. So it is a big issue world-wide," commented Kandjoze.
The MD also mentioned NAMCOR's depot capacity, which is estimated to be around 18 million litres and has remained stable since 2009. To capitalize on the growth in demand NAMCOR is currently constructing an additional depot in Walvis Bay and is investigating the construction of additional strategic storage facilities in Windhoek, Ondangwa, Luderitz and Gobabis.