Namibians should not sit back and wait for the benefits of recent oil discoveries to come to them but already exploit the opportunities presented by the budding petroleum
industry.
Mines minister Tom Alweendo yesterday said the immense economic benefits from these discoveries cannot be overemphasised. He made this comment after Namibia announced its third major oil discovery in a year.
National Petroleum Corporation of Namibia (Namcor) yesterday confirmed a third discovery of light oil off the Namibian coast.
The oil was discovered in the Jonker-1X deep-water exploration well, located in blocks 2913A & 2914B (PEL 0039) in the Orange Basin, offshore southern Namibia.
The discovery’s partnership comprises Shell Namibia B.V (45%), QatarEnergy (45%) and Namcor (10%).
Speaking to this publication yesterday, Alweendo said the discovery will put Namibia on the global map and earn a lot of revenue. However, he said the biggest gain for him is the local content issue.
Local content is the value that the extraction of oil brings to the local economy beyond the resource revenue.
Minister urged business people to prepare themselves to deliver whatever services the new industry will demand.
“We sit quietly – and after some years, you will hear people complaining that only foreigners are running the show. I know this is a complex task, but we can enter into joint ventures with the aim that Namibians acquire skills for the sector,” stressed Alweendo.
Furthermore, the minister hopes having more revenue will help the country tackle the most pressing issues – and not be the same case – even with additional money: “Sometimes, it is not the issue of not having money; it is the issue of prioritising”.
The confirmation followed Shell’s announcement early last year after hitting oil with its Graff-1 probe in Block 2913A – just ahead of TotalEnergies, striking hydrocarbons at its huge Venus prospect in adjacent block 2913B and before Shell went on to have success with its follow-up La Rona-1 well close to Graff.
According to a statement yesterday by Namcor, the drilling operations commenced in December 2022 and were completed safely in early March 2023.
“Located approximately 270 kilometres off the coast of Namibia, in the deep-water offshore, the Jonker-1X discovery is the third well drilled on the license held by Shell within a year. The Odfjell Deepsea Bollsta semi-submersible rig drilled the well to a total depth of 6 168 metres in a water depth of 2 210 metres,” reads the statement.
It added the acquired data is currently being evaluated, and further appraisal drilling is planned to determine the size and recoverable resources potential of the discovery.
Namcor’s executive of upstream exploration Victoria Sibeya said the encouraging results from the well are a geological testimony of the significant hydrocarbon potential in the deep-water play of the Orange Basin.
Sibeya noted the next step is looking forward to the appraisal activities to “fully assess the commerciality of this discovery”.
Commenting on the announcement, Immanuel Mulunga, managing director of Namcor, said: “We are delighted to announce this third oil discovery after the success of the Graff-1X and Venus-1X discoveries by Shell and TotalEnergies in 2022. This discovery has proven the exciting and world-class potential of the deep-water Orange Basin”.
The significant discoveries are creating expectations of massive future government oil revenue. However, a leading Namibian wealth management outfit, PSG Namibia, said Namibia will only reap the rewards of these discoveries in a few years.
“However, Namibia is set to receive massive oil revenues only after 2030 when oil giants would have recovered their exploration and development cost and Namcor had repaid its share of the costs. Given that the first production of crude oil is only likely from 2028, potential government oil revenues will be relatively limited before 2031, but it could rise markedly thereafter if the oil price remains strong,” reads a PSG Namibia report, titled ‘Namibia Economic Focus February 2023’.
Oil companies still have to confirm the technical and financial viability of the discoveries. Despite this, some analysts made some bold predictions that the Namibian economy will double by 2040, and that government could earn more than US$3.5 billion (approximately N$53.5 billion) annually in royalties and taxes at peak production from oil finds.
PSG Namibia added that royalties are set to be the main source of government oil revenue in the first three years of production.
Expected revenue streams from the sector are royalties, petroleum income tax, additional profit tax, withholding tax and licence fees. In total, the percentage of revenue that the government will receive from taxes and royalties, Namcor’s share, could be as high as 65%, stated PSG Namibia.
Energy economist David Jarrett noted the economy should welcome the new find with caution, as it is in the general area of the two previous.
“Regardless, it is a clear achievement for the country and the government, which must now be carefully managed. The same questions, however, remain such as: what recoverable quantities exist and how will this be exploited for the mutual benefit of all?” he asked.
Jarrett also questioned whether there is a need to relook quickly and rationally at how the fiscus can capitalise upon these resources/future funding streams.
– mndjavera@nepc.com.na