By 
By Kwanele Dhladhla
The Eswatini National Petroleum Company (ENPC) has clarified the conundrum, which has led to the false narrative that there has been a project cost increase of over E3 billion from E2.2 billion to E5.2 billion at the historic Strategic Oil Reserve Facility, which actually comes with massive economic benefits for Eswatini.
The Acting Chief Executive Officer of the Eswatini National Petroleum Company (ENPC), Musa Shongwe, has disclosed that the E2.2 billion was only an engineer’s cost estimate, which was based on ready-for-tender designs and whose scope also did not include certain quality and safety provisions.
He mentioned that the deal with the Republic of China (Taiwan) included finance-raising for the 60-day storage facility, which had proved to be a challenge for ENPC in the last couple of years, further stating that the contract price was a fixed sum and that there was no risk that it could escalate as any variations will be absorbed by the contractor.
He stated that 36 months after the commencement of construction, an operational and fit-for-purpose facility would be handed over to ENPC, failing which the contractor would be compelled to pay penalties to ENPC.
Shongwe explained that the package includes the financier (EXIM Bank), Design Consultants (CTCI), EPC Contractor (OEEC), and Project Manager (CECI), which would ensure that the budgeted figure and actual project cost stay the same.
He pointed out that other differences include, but are not limited to, ready-for-construction designs issued, whereas previously, ENPC would have only received ready-for-tender designs, thereby having to pay more to improve the designs to ready-for-construction designs.
RELATED: Government pumps in E1.09 bn for Natural Resources Ministry
“This means that more work would have had to be done, thus increasing the cost. In addition, when contractors price the tender, the price could have gone higher from the engineer’s cost estimate – this is a very common phenomenon and explains why there is usually a difference between a budgeted figure and actual cost,” said Shongwe.
He mentioned that the contract price by OEEC includes the project management fee, which was otherwise not included in the previously indicated figure of E2.2 billion.
Shongwe said the OEEC contract includes the training of ENPC staff who would then be able to operate and maintain the facility. In the previous tender, ENPC would have had to hire an operational and maintenance contractor to run the facility on behalf of ENPC, which would have attracted additional costs.
Shongwe said the CTCI designs include nitrogen blanketing, which is a safety measure against the risk of fire and explosion in the tanks; this was not included in the previous designs.Further, he said the CTCI design includes a weighbridge,
which is an additional volume verification measure; this was not included in the other tender as it only relied on the fuel flow meters, hence no backup in the event they have failed or areout of service/calibration.
He went on to state that the CTCI design includes 10 additive tanks for the various oil companies, which were not included in the other design; only tie-ins were provided.
The fire-fighting system in the CTCI design has a higher capacity (volume), whereas the previous design has a lower capacity fire-fighting system.
The acting CEO said the E5.2 billion loan, which has been passed by both houses of Parliament, supports Eswatini’s long-term energy and economic security.
The Strategic Oil Reserve remains one of the key Energy projects included in the plan of action 2025/29.
“The project will help to improve fuel supply security in the country, and ensure constant availability of fuel supply thereby increasing the chances of attaining the intended Gross Domestic Product (GDP) growth since fuel drives the economy,” Shongwe said.
He added, “The project incorporates ethanol blending, which will reduce fuel imports, whilst also reducing the emission of carbon dioxide.
he Ministry of Natural Resources and Energy and ENPC have confidence in the Taiwanese consortium on the timely delivery of the project, and within quality and cost, as benchmarking was done on similar projects.”
Minister of Finance Neal Rijkenberg also informed the House of Senate that the Strategic Oil Reserve aims to enhance national energy security and ensure fuel security of supply during emergencies and market disruptions.
RELATED: MPs give thumbs up to E5.2 Bln Strategic Oil Reserve
He stated that the Kingdom of Eswatini has suffered periodic shocks historically with the supply of petroleum products. Rijkenberg said although the impact of such occurrences, specifically on pricing has been cushioned by the Strategic Oil Fund, the industry remains vulnerable to systematic risks including supply chain disruptions and country risks as relates to South Africa and Mozambique where all imports are sourced.
“As part of efforts to cushion the economy from the shocks of supply disruptions, the ENPC was established to develop a fuel storage facility to store up to sixty (60) days of national requirement.
In delivering on its mandate, ENPC is seeking to develop an 80 million-litre petroleum storage facility in Phuzamoya, Eswatini and a four million-litre ethanol storage and blending facility,’ said Rijkenberg.
Apart from providing solutions to the long-standing challenge, the project will also support the Kingdom to meet its minimum storage reserve requirements as established by the Southern African Development Community’s (SADC) Regional Infrastructure Development Master Plan.
