The development of a Namibian oil and gas industry presents numerous challenges, including dwindling financing and more stringent environmental parameters as the world transitions to net zero. This is according to economist Robin Sherbourne, who last week pointed out various headwinds, emphasising that time is of the essence as Namibia celebrates significant oil discoveries off its southern coast.
“Namibia is developing an industry against certain headwinds, and things will get more difficult for new fossil fuel projects from financing to environmental standards. There’s a bit of time pressure because the door is slowly and steadily starting to close, and trying to develop this new industry in the midst of that closing door,” he stated while outlining challenges for economic policymakers at the recently-ended Oil and Gas Conference 2023.
Sherbourne questioned the pace at which Namibia envisions the development of this new industry, and urged policymakers and stakeholders to proceed as fast as possible to maximise benefits for the country.
The economist cautioned that the door is quickly closing while Namibia used precious time in haggling over details such as local content, onshore refineries and tax regimes.
Another challenge he highlighted is conflict of interest, given that the Namibian government is both an active shareholder and the regulator in oil and gas development.
“How does government balance the interests of being both the regulator and shareholder? What can Namibia do to maximise additional economic benefits through encouraging the use of local content and the employment of Namibians?” the economist asked. Sherbourne also wanted to know whether Namibia has the ability for good governance in the development of the oil and gas sector. According to him, the country already has a dubious record in sectors such as fishing and diamond mining.
“Our track record is not great in terms of management, openness and transparency. We need to discipline ourselves to make sure we do the right thing,” he urged.
During the opening of last week’s oil and gas conference, mines and energy minister Tom Alweendo noted that Namibia’s recent oil discoveries were made at a time when the energy transition discussion reached its crescendo.
“We have observed cases where countries with fossil fuel resources, especially developing countries like ours, are being discouraged not to leverage their fossil fuel energy resources in the name of climate change. We are being urged to, as soon as possible, switch to clean, renewable energy sources such as solar and wind,” he observed.
The minister, however, said he finds this request unreasonable, particularly when some countries and global interest groups demand that the energy transition takes place in a linear fashion, completely disregarding the livelihoods of those affected.
“We are, therefore, calling for an energy transition that is just and equitable among nations. However, recognising the inevitability of the energy transition, we understand and accept that fossil fuel may no longer be the fuel of the future, and that the world is transitioning to renewable energy. It is for this reason that we, together with the international oil companies, need to ensure that our oil sector is being developed with the lowest carbon emissions from inception. This will be the most effective way to ensure that our oil sector is competitive in the global markets,” Alweendo stated.
The minister also noted that corporate governance of the oil and gas sector is imperative to ensure potential economic benefits are shared equitably and fairly. Governance failure, he warned, can have far-reaching implications for the domestic economy, social development and political stability.