GOVT COMMITS TAXPAYER TO E5.2 BILLION STRATEGIC OIL RESERVE

MBABANE – The pockets of taxpayers are expected to be further strained as government has decided to sign a contract valued at an estimated E5.2 billion.

The contract is for the construction of the Strategic Oil Reserve facility at Phuzumoya, Siphofaneni, in the Lubombo Region. This decision comes despite the availability of a significantly cheaper proposal, which was estimated at E2.2 billion for the same project. The now-debated Strategic Oil Reserve facility is planned to be located at Phuzumoya, Siphofaneni, in the Lubombo Region. It is important to note that citizens have expressed concerns regarding the high costs associated with the infrastructure development projects that government is currently undertaking. Many of these concerns were highlighted during Sibaya (People’s Parliament) held in November of the previous year. The outcry is primarily focused on the fact that most projects tend to exceed their initial cost estimates.

The Times SUNDAY has learnt that following much deliberation, government has finally signed an agreement with the Overseas Investment and Development Corporation (OIDC), a Taiwanese company responsible for executing governmental overseas aid projects, to undertake the construction of the facility. A delegation from Eswatini, including officials from the Eswatini National Petroleum Company (ENPC), travelled to Taiwan last week to finalise the deal.

In a public announcement shared on Taiwanese social media, the Ministry of Foreign Affairs of Taiwan (Republic of China) confirmed the agreement’s signing, which occurred on November 29, 2024. The announcement was accompanied by photographs of the delegation from Eswatini alongside Taiwanese officials. The statement noted that Taiwan’s Minister for Foreign Affairs, Lin Chia-Lung, met with a delegation led by Eswatini’s Minister for Tinkhundla Administration and Development, Sikhumbuzo Dlamini and Nhlanhla Dlamini, the Chief Executive Officer (CEO) of ENPC.

According to the statement, during their discussions, representatives from both countries explored bilateral relations and Taiwan’s support in building an oil storage facility in Eswatini.
“Minister Dlamini is in Taiwan to witness the signing of a contract between Taiwan’s Overseas Investment & Development Corporation and ENPC. Minister Lin welcomed Dlamini on his visit and described the agreement’s signing as a significant milestone in the oil tank project,” part of the statement reads. The announcement also noted: “Eswatini is an important ally for Taiwan in Africa, and MOFA wishes to thank the King and the country for their continuous support of Taiwan’s involvement in the global community. We will continue to collaborate with the country based on our friendly relations under cooperative initiatives, aligning with the Allies Prosperity project.”

Clarified

Velaphi Dlamini, Chairperson of the ENPC Board, confirmed the contract’s signing but clarified that this remains a work in progress; further details, including design costs and other aspects, will be communicated to the public in due course. Conversely, the Minister for Natural Resources and Energy, Prince Lonkhokhela, stated that this is a crucial national project still on the table. “Enquire after it has undergone parliamentary approval; a financial bill must first be enacted, and that is all I can disclose,” he said.

It should be noted that the government has, for years, been advocating for the facility’s construction, believing it will guarantee the country a fuel reserve lasting up to 60 days, thereby reducing the risk of fuel shortages. Previously, the project’s cost escalated to E3.2 billion, as reflected in the 2021/22 financial year budget estimates. Intriguingly, in 2022, His Majesty King Mswati III mentioned that the Strategic Oil Reserve would facilitate investment opportunities for oil traders from Abu Dhabi and Dubai in Eswatini. He stated this during a press briefing at the Ludzidzini Royal Residence, where he reported on his visits to the United Arab Emirates (UAE), Taiwan and South Africa.

The King said the main purpose of the trip in all these countries was to attract foreign investors.  His Majesty said Eswatini could benefit from the crude oil and natural gas produced in Abu Dhabi and Dubai because oil proved to be a resource that was necessary for life to be easier. He said the natural gas could be used in Eswatini in a number of ways.
The head of State mentioned that Eswatini’s relationship with the UAE would make it easy to import oil from both Abu Dhabi and Dubai and that the facility could come in handy to store the oil that could be traded with the UAE.

According to the international trade administration, the UAE is among the world’s 10 largest oil producers. About 96 per cent of the country’s roughly 100 billion barrels of proven oil reserves are located in Abu Dhabi, ranking number six worldwide. The UAE produces an average of 3.2 million barrels of petroleum and liquids per day. Government has previously explained that the facility had three components –blending, refinery and storage. Energy experts say blending amounts of alternative fuel with conventional petrol/diesel is one way to conserve petroleum. Blends can also consist of two types of alternative fuels, such as hydrogen and compressed natural gas (HCNG).

Other experts say fuel blending involves mixing hazardous wastes or hazardous waste and commercial fuels to meet the specifications required by an incinerator, a cement kiln or an industrial furnace. It should be noted that in October this year, Members of Parliament (MPs) and senators raised concerns after learning that there was a controversy surrounding the construction of the facility. This happened during a workshop organised by the Ministry of Natural Resources and Energy for its Portfolio Committees in both Houses of Parliament.
Our sister publication, the Times of Eswatini, reported that the concerns by the MPs submitted that they had heard different versions about the value of the construction of the facility.

Engaged

The MPs are said to have raised that they had heard rumours that government had engaged or given in to a proposal by the Republic of China (Taiwan) to construct the oil and fuel reserve two times the price of an initial contractor that was engaged by the ENPC. Initially, the MPs complained about the price of the oil reserve which was then estimated at E2.2 billion.
However, reports emerged that price could possibly increase to E7 billion after the Republic of China (Taiwan) forwarded its proposal to do the work. The construction of the reserve under the ENPC will see the country having up to 60 days of fuel supply, thus safeguarding the country from any shortages should there be challenges in terms of transportation among other issues in the countries Eswatini uses as transit for its fuel.

During the work, as reported by our sister publication, the ENPC CEO informed the parliamentarians that the company conducted a feasibility study and business case that were completed in 2023.  The CEO is said to have said a consultant from neighbouring South Africa was appointed by ENPC to produce detailed designs of the Phuzumoya Project and cost estimates.The appointment, the CEO reportedly said, was through a competitive bidding that was approved by the Eswatini Public Procurement Regulatory Authority (ESPPRA).
Moreover, the CEO reportedly said a 99-year lease for the land is in place at Phuzumoya and part of the fundraising is ongoing and that the Republic of China (Taiwan) had shown interest and the government requested that ENPC to give Taiwan an ear.

Estimated

He said the Taiwanese presented their basic designs that were estimated to be at E7 billion. He said they engaged with the Republic of China (Taiwan) until the designs were E5.2 billion.
Parliamentarians were informed that talks are ongoing between government, ENPC and Taiwan and that there were two prices, E2.2 billion and E5.2 billion on the table. Furthermore, the parliamentarians were informed that ENPC had already raised E1 billion for the project which can finance the 30-day storage, which is 4 000 litres. Furthermore, the CEO communicated his wish to have the project started in the first quarter of 2025. That would have depended on whether the ENPC constructs the 30-day storage or 60-day one, but that was to happen within two and a half years.

The project is expected to make financial gains for the country. Following the presentation by the CEO, the parliamentarians demanded answers on why it was difficult to take a decision on which consultant or contractor to engage. The MPs are said to have submitted that they had heard reports that the cheaper price was just for basic designs while the higher price included refinery plants. It was revealed that the expensive contract actually covered just basic designs yet the cheaper one was a more detailed design. Information gathered suggested that the consultant conducted similar jobs in recent years in Botswana for E1.8 billion; hence the E2.2 billion was practical.

Meanwhile, this publication reported how His Majesty King Mswati III wanted the contract for the construction of the Strategic Oil Reserve facility to be signed as soon as possible.
It was reported that upon his arrival at the ENPC stand during this year’s international trade fair, the King enquired about the exact timeline for the contract’s finalisation. In a light-hearted manner, he elicited laughter from those present by noting the presence of Ambassador Jeremy Liang and requesting that he be summoned to confirm the news regarding the imminent conclusion of the contract negotiations.

The ambassador, who was positioned a short distance from His Majesty, approached and stood beside the CEO. “Please share the good news that I have been hearing. The good news that the contract for the construction of the Strategic Oil Reserve will be finalised next week,” the King stated at that time to a round of applause. The ambassador responded with a smile, and the King then urged all parties involved in the project to confer and provide him with updates the following week.

It is essential to recognise that during the presentation of the Speech from the Throne in February 2024, the King emphasised the necessity of prioritising certain outstanding capital projects, including the Strategic Oil Reserve. The King explicitly expressed his desire for the project to commence within six months. For context, in September of the previous year, Taiwan committed to assisting Eswatini, its sole African ally, in the construction of a new oil tank, as outlined in a Memorandum of Understanding (MoU) signed by both nations and their respective enterprises.
initiatives
The Overseas Investment and Development Corporation (OIDC), a Taiwanese firm dedicated to executing government overseas aid initiatives, was appointed to develop the Strategic Oil Reserve facility. It was reported that the Kingdom of Eswatini aimed to establish an oil tank capable of storing a minimum of 30 days’ worth of oil reserves. Former President Tsai Ing-wen, during her four-day visit to Eswatini, praised the agreement as a significant advancement in the bilateral relations between the two nations. She noted that discussions regarding the construction project had been ongoing for some time, emphasising that the proposed facility would play a crucial role in securing the nation’s energy supply.

According to the government’s website, Eswatini relies heavily on oil imports from South Africa, making it vulnerable to fluctuations in international crude oil prices. Consequently, government has tasked its national oil company, ENPC, with the responsibility of constructing and managing the oil reserve facilities to enhance energy security. The MoU was signed by Jeff Chung, General Manager of OIDC, and Nhlanhla Dlamini in his capacity as the CEO of ENPC.The signing ceremony was attended by His Majesty King Mswati III and former President Tsai.

Established in 1995, OIDC is a collaboration of various State-run and private enterprises in Taiwan, aimed at executing aid and infrastructure initiatives in allied nations of the Republic of China (Taiwan). The proposed new oil reserve facility is anticipated to bolster fuel supply security and significantly aid the socio-economic development of Eswatini through infrastructure enhancement and job creation. On its website, the ENPC states that it is the country’s national oil company established by the Petroleum Act No.18 of 2020 and has been mandated by government to build and operate a Strategic Oil Reserve Facility at Phuzumoya.

The company says the facility will enable security of fuel supply and significantly contribute towards the socio-economic development of the country through infrastructural development and job creation. In November 2023, ENPC invited companies for pre-qualification of contractors for the proposed construction of the Strategic Fuel Reserve Facility at Phuzumoya.
This was referred to as Tender No.10 of 2023/2024. According to the project background as relayed by the ENPC, the public entity is planning to construct a Strategic Oil Reserve facility at Phuzumoya that will be central to the country’s goal of having security in energy supply and mitigate fuel supply disruptions.

Currently, Eswatini sources petroleum products from the international markets through the Republic of South Africa and Mozambique. Most of the products are distributed from the commercial storage facilities in Matsapha. The company said the stock was, however, generally limited to approximately two to three days storage, despite the Petroleum Act of 2020 mandating the oil companies to hold 14-days’ commercial stock. As a result, the Government of Eswatini, through ENPC, intends to develop the Strategic Oil Storage facility.
The facility will hold up to 80 million litres of fuel stock, which is equivalent to 60 days’ consumption for the country. It will also offer blending for all its 95-ULP.

Proof that Eswatini was determined to see the project start was evident when Prime Minister (PM), Russell Mmiso Dlamini visited Taiwan in March this year to pitch for investment for the African kingdom and discuss details of the fuel storage facility. During his visit, the PM gave feedback to the effect that he had an engagement with former President Tsai Ing-wen and that they then proceeded to tour Taiwan’s leading engineering company, CECI Engineering Consultants. Also, the PM shared that ambassadors from both countries presented a progress report of the project at Phuzumoya and its designs.

The PM emphasised that the establishment of the facility will enhance the nation’s ability to secure its fuel supply, thereby mitigating the economic repercussions of potential fuel supply disruptions in the market. He noted that Eswatini currently lacks fuel stock reserves and that the existing bulk fuel storage infrastructure is severely limited. “This situation renders us economically vulnerable to any disruptions in the supply chain, whether from external or internal sources. Therefore, the creation of this facility is of paramount importance,” the PM said.

Reputable

During his visit, he encouraged CECI to establish operations in Eswatini, as it is a reputable company that employs approximately 2 300 individuals in Taiwan and other countries. “Their expertise lies in the construction sector, and they are well-known for their work on railway lines, bridges and hospitals, among other projects,’ he explained. Nine years ago, the cost for the construction of the facility was E900 million. In the financial year 2022/2023 and 2023/2024, theENPC had fixed the costs at E2.1 billion.

A proposal was tabled by a certain company fixed the construction of the Strategic Oil Reserve facility at US$380 million, the equivalent of E7 billion in the current foreign exchange rate.
The Burgan Cape Terminals (Pty) Ltd, South Africa, built the 118 million-litre fuel storage capacity in Cape Town at a cost of E1.2 billion. It was built because of the shortage of oil refinery facilities in Cape Town, long haul distances and congested loading at existing facilities. It was launched on August 30, 2017. The facility was built by VTTI. VTTI, at some point, showed an interest in constructing the Phuzumoya fuel storage facility at a cost of E900 million.

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