Nocma to award 4 new fuel contracts

National Oil Company of Malawi (Nocma) has issued a notice of intention to award fuel contracts for 2023/24 to four suppliers of which HAPCO FZE is the newest while Camel Oil has been retained from the previous contracts.

HAPCO FZE is an oil company based in Dubai, according to a search on the Internet.

The two other suppliers, Addax Energy SA and Augusta Energy, have ever been engaged by government before.

According to the notice published in yesterday’s local dailies, the suppliers will import the fuel using the ports of Dar es Salaam in Tanzania, and Nacala and Beira in Mozambique.

The notice also shows that three premiums will be used in the importation of the commodity, namely DPU, Ex-tank and Cost, Insurance and Freight (CIF), which was not used in the last fuel supply contracts.

In an interview yesterday, Malawi Energy Regulatory Authority (Mera) chief executive officer Henry Kachaje confirmed that Mera approved the premiums.

CIF indicates pricing of the commodity on a delivered basis which includes the cost of oil and freight to its destination.

Under ex-tank procurement, local importers take charge of ownership of the product destined for Malawi and are responsible for in transit risks such as theft, accidents and contamination up to the internal receiving depots of oil marketing companies.

Under the DDU, the supplier assumes all the risks for delivery of the product from the external depots at the ports to various destinations. In this case, the local importer only takes charge of the products after it is delivered on site at local depots in the country.

Public Procurement and Disposal of Public Assets Authority public relations and communications manager Kate Kujaliwa in a response to our questionnaire indicated that the authority granted the State-owned fuel company the ‘No Objection’ on April 6 2023.

Earlier, Nocma had requested for approval to waiver the bidding period and PPDA granted the approval on December 14 2022 for the company to invite bids within 21 days instead of 45 days.

Said Kujaliwa: “Following the approval, Nocma proceeded to solicit bids through open tender. Upon closing of the bidding process, the bids were evaluated and a request for ‘No Objection’ was submitted to the authority.”

When contacted for comment on the fuel contracts, Fuel Transporters Operators Association (FTOA) secretary Mwiza Chawinga hailed Nocma for the premiums saying he is optimistic that 90 percent of the volumes will be moved by local transporters under ex-tank.

He said, according to calculations, out of 356 500 Metric tonnes (MT) of both petrol and diesel under ex-tank, 303.025MT will be moved by Malawian transporters.

Said Chawinga: “This will benefit the country as it will help Malawian transporters to participate in economic activities thereby creating jobs for the locals.”

He said his association’s calculations show that government may save up to $50 631 229 by the end of the contract.

But a procurement expert, who did not want to be named, has observed that the premiums offered by Camel Oil are on the lower side compared to those of other suppliers and wondered where the supplier will be importing its consignment from.

For example, using DPU through Dar es Salaam to Mzuzu, Camel Oil is charging $340.78 per MT while Augusta Energy is charging $392.10 per MT.

Using the same DDU from Dar es Salaam to Lilongwe, Camel Oil is charging $374.11 per MT while Addax Energy SA is charging $405.63.

Under ex-tank Camel Oil is charging $134.98 through Beira Port while Augusta Energy and Addax Energy SA are charging $239.76 and $ 245.70 per MT, respectively.

According to the expert, considering port charges and the harsh economic times, especially with scarcity of foreign exchange, it will be interesting to see if the supplier will sustain the supplies.

Said the expert: “My opinion is that perhaps the supplier is getting the fuel from somewhere cheaper, but where?” he asked.

Procedurally, according to the procurement law, the high-value contracts are also supposed to be vetted by other government offices such as Government Contracting Unit (GCU), Anti- Corruption Bureau (ACB) and Ministry of Justice.

ACB spokesperson Egrita Ndala, in an interview this week, said the bureau is not supposed to give out information on whether the contract has already been vetted.

GCU was yet to respond to our questionnaire on whether it has vetted the contract.

Nocma currently imports 55 percent of the country’s fuel, with the remaining 45 percent imported by privately-owned consortium of Petroleum Importers Limited.

In May 2021, the Parliamentary Committee on Natural Resources invited Nocma and Mera to an interface where the committee resolved to let Nocma proceed with procurement of fuel using DDU.

In his address during the meeting, former Mera chairperson Leonard Chikadya said the regulator’s interest was to ensure that Malawians purchase fuel at reasonable prices and there is no shortage of fuel in the country.

In June 2021, ACB restricted Nocma’s fuel procurement process to pave the way for investigations following alleged anomalies.

ACB’s move came after the High Court had earlier granted the Fuel Tankers Association an injunction stopping Nocma from using the DDU, arguing that the system was not provided for in the country’s laws.