Namibia: Opportunities and Risks of Becoming an International Oil and Gas Player

Historically overlooked by independent oil companies (IOCs) and considered something of an oil and gas frontier state, Namibia is establishing itself more prominently on the international oil and gas map.

The Wingat-1 discovery by HRT in 2013, which encountered rich oil-bearing source rocks in the Walvis Basin, was the start of this change and, in the years since, the country has become a much more attractive proposition for oil exploration.

Coupled with favourable fiscal incentives, Namibia has drawn a wealth of oil majors including Tullow, Total, GALP, Shell, ONGC and ExxonMobil.

A coming industry boom is anticipated.

Namibia’s competitive petroleum exploration scene has helped the state-owned National Petroleum Corporation of Namibia (NAMCOR) to take a stand in shaping the country’s prospects. With a 10% interest in multiple international companies operating in the country, NAMCOR is ready to help Namibia become one of the leading petroleum-producing countries on the continent.

“Namibia’s growing oil and gas sector is likely to transform the country’s economy,” says Maggy Shino, Petroleum Commissioner for Namibia.

“We anticipate discussing these developments with our stakeholders at Africa Oil Week in Dubai in November, with Hon. Minister Tom Alweendo, Minister of Mines and Energy, who has confirmed his presence.

“Having the event in Dubai in 2021 offers a new opportunity to engage with Middle East investors and operators; we understand that hosting the event in Dubai this year is a sensible and defensible decision, given the current COVID-19 pandemic.”

Promising opportunities

With the anticipation of the results from the upcoming drilling of the Venus well by Total offshore in the Orange Basin, the future for the Namibian oil industry looks bright indeed.

However, it is current results obtained from northern Namibia, on the border of Botswana and Angola, where exploration excites.

ReconAfrica has drilled two stratigraphic test wells in the Namibian petroleum licence area to date, both of which have revealed evidence of a working conventional petroleum system.

The current drilling campaign by ReconAfrica has enhanced understanding of the hydrocarbon potential onshore northern Namibia and the company plans to drill additional wells to determine if this sedimentary basin will yield a commercially viable petroleum accumulation.

“By collaborating with an international company with both technical and financial capabilities, we will unlock the discovery of commercially viable hydrocarbon reserves and thereby enhance economic development in the country,” says Ms Shino.

Scot Evans, CEO of ReconAfrica, comments: “We look forward to working with NAMCOR as we jointly endeavour to unlock the potential of Namibia’s vast national resources – providing jobs, economic growth and long-term responsible resource development, which includes significant contributions to the social and environmental aspirations of the country.”

In addition to the creation of jobs for more than 200 Namibians currently, the partnership will also present further economic opportunities, including taxes and potential future royalties. The two companies have also committed to the adoption of a stringent health, safety and environment plan that will guide operations.

Mitigating risks

Not everyone agrees that the disruption caused by the development adheres to all of Namibia’s National Development Plan’s objectives, which call for economic progression, social transformation, environmental sustainability and good governance.

Environmental activists are concerned that the move to drill for oil in the Kavango East and West Region will disrupt biodiversity and ecosystems, as well as potentially contaminate water supplies in an area that often suffers from drought. Local indigenous populations have also criticised the move, saying that they have yet to be properly consulted.

“For Namibia, the contamination of groundwater is a real risk, and it needs to be managed very well,” says Piet Smit from the Environmental Assessment Professionals Association of Namibia. “We also need to be sure that whatever gets approved can physically be done on-site.”

Smit’s biggest concern is the possibility of uncontrolled development in a region that has few sealed roads, large towns or amenities to cope with a sudden influx of people.

While ReconAfrica and NAMCOR’s collaboration serves as a good example of the clamour to invest in the Namibian oil and gas sector before its scale is understood, all possible risks need to be mitigated.

All parties, together with the Namibian Government, must find a sustainable balance between the needs of the oil and gas industry, and the needs of the country’s people, in order to realise the full potential of attracting investment in this area.