Mines and energy minister Tom Alweendo has told parliamentarians that Namibians must be cognisant of the risks when trying to increase government’s share in the oil and gas industry.
“The answer is yes, we can increase our share, but we just have to know by how much can we increase it in such a way it does not scare away the people who are going to bring the money. But, it is imperative to get more experience in the discovery and understand how much money will be made,” said Alweendo last week while addressing a Parliamentary Standing Committee on Natural Resources information session.
The session was aimed at informing parliamentarians on the oil and gas discoveries in the Orange basin and to present a draft local content policy.
The committee has the mandate to monitor, enquire and make recommendations to the National Assembly on matters that may directly or indirectly affect the country’s natural resources.
The minister further advised that Namibia should take time to understand and gain the required experience of the sector
before considering increasing its ownership through the National Petroleum
Corporation of Namibia (Namcor) that currently holds 10% in all licences.
Both Shell, with its Graff-1 well, and TotalEnergies, with its Venue-1 well, are assessing two high profile wells within the Orange basin and the recent success in confirming oil deposits is expected to make the Orange basin one of the hottest exploration destinations in the world.
Meanwhile, at last week’s session, Namcor upstream exploration executive, Victoria Sibeya, said the corporation is mandated to carry out reconnaissance, exploration and production on its own or in partnership in the sector.
Sibeya said up to date, Namibia has 32 petroleum licences, of which 31 are in exploration phase and one in development with a production licence.
In all 32, she added, Namcor has 10% carried interest.
“On fiscal share, the Namibian
government takes 64% if you sum up its benefits in the oil and gas industry. Government earns in a form of royalties (5%), petroleum income tax (35%), Namcor stake (10%), and in additional profit tax when the company makes super profit which is also negotiable,” she stated.
This leads to an investor to only take home 36% from the partnership.
“If you try to increase Namcor’s share, then you are also eating not only at the investor’s take but also from the interest that Namcor is carried on. Government also has the right to take more stake provided we pay for it, which is negotiable,” she informed the committee.
Sibeya further cautioned that increased Namcor participation will require a capital-intensive investment.
Furthermore, Alweendo noted Namibia needs a local content policy (LCP) to
facilitate economic diversification and deepen both backward and forward linkages from various segments of the oil and gas sector’s value chain, thereby fast-tracking industrialisation.
Local content can be defined as the
active participation of the Namibian
workforce and entrepreneurs in the upstream oil and gas sector through training, employment and local procurement of goods and services.
Alweendo reiterated that oil and gas discoveries in commercial quantities hold great potential to transform the domestic economy beyond taxes and royalties that would accrue to the State, hence the introduction of the LCP.
Last year, minister Alweendo noted that lessons from other oil-producing nations show that excluding the majority of people from meaningfully benefiting from the lucrative oil and gas sector has resulted in huge social inequality which fuelled social discontent and unrest.