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Oil discoveries could transform economy…meaningful jobs, significant revenue envisaged

2022-03-18  Edgar Brandt

Oil discoveries could transform economy…meaningful jobs, significant revenue envisaged
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Once the commercial viability of Namibia’s first-ever noteworthy oil discoveries off the coast by Shell and TotalEnergies have been verified, these hydrocarbon detections have the potential to benefit the country’s economy by billions of dollars in revenue. In addition, a bourgeoning local oil industry holds the potential to create unique business opportunities for the country’s economic development through the establishment of a new sector that could provide much-needed jobs. 

“Consequently, these discoveries could attract local and foreign investments in exploration and development from international oil companies who might be interested in pursuing business opportunities in Namibia. These could lead to more discoveries being made and increase the volume of proven oil reserves. The oil discoveries could have a spin-off effect in the economy and activities of the oil industry could boost the GDP growth of Namibia,” said Utaara Hoveka, spokesperson at the National Petroleum Corporation of Namibia (Namcor). 

Responding to questions from New Era, Hoveka noted Namibia would just not be an oil-producing nation, but the revenue generated from oil production could fundamentally transform the economy and enable it to meet its key sustainable development goals. 

Therefore, said Hoveka, a well managed oil sector can bring huge positive and sustainable impacts to Namibia such as socioeconomic growth and positive economic externalities.

He added that to derive maximum benefit from the recent discoveries, Namibia should strengthen and develop its financial sector and fiscal management capacities to prepare the country to gain maximum value from the discovered oil resources. 

Said Hoveka: “Furthermore, maximum benefit can be achieved by building human capital (knowledge, skills, creativity, and wellbeing – by improving the education and health system) and institutional capacity to manage the petroleum sector in parallel with the process of expanding the productive activities of the petroleum industry and the execution of other national development plans. Such conditions (human capital and institutional capacity) are essential for Namibia to effectively benefit from the wealth generated by oil resources as well as the desired diversification of the economy.”

He further advised that revenue generated from oil production should be administered through the creation of a sovereign wealth fund, to generate wealth for future generations. Furthermore, Hoveka explained that during the exploration phase, consisting of both onshore and offshore activities, job creation is minimal with limited opportunities for Namibians.  “However, those with experience can be attached during drilling activities. Thus, it would be best that Namibians start upskilling, acquiring the necessary skill sets, and knowledge of what the industry would require and the opportunities that could arise from the oil industry,” Hoveka continued. 

 

Oil industry jobs

Meanwhile, the oil industry has a wide spectrum of job opportunities. 

Key direct, as well as indirect jobs that could be created for Namibians during oil exploration and production, include: Direct Jobs: Petroleum engineers (such as reservoir engineers, production engineers, drilling engineers), mud loggers, geoscientists (geophysicist, geologist, petroleum geochemist, petro physicist, sedimentologist, well site geologist). Other jobs for the oil industry, requiring vocational skills, include derrickman, driller, toolpusher, mud man, floor hand, motorman, petroleum engineer, hydrographic surveyor, subsea/pipe manager, process (chemical) manager, structural managers and electricians, among many more. 

Indirect jobs for a budding oil industry would include truck drivers, health and safety services, casing, and tubing services, wireline/logging services, coil tubing services, cementing services, fluid management services, rig manager, foreman, auxiliary services, catering services, rental/accommodation services, marine, port and logistics services, instrumentation services, welders and artisans, to name a few. 

Also weighing in on the recent discoveries, Olayinka Arowolo, chief executive officer of Nabirm, a Windhoek-based oil and gas explorer, said, “since we are talking billions in revenue, sustainability now becomes a function of good governance within the government. Naturally, I expect a disciplined approach to the harnessing of these resources for the benefit of all Namibians. The ministry of mines together with Namcor have the most professional talent I have ever worked with and I am confident this will translate well for long-term sustainability of the Namibian compact.”

Arowolo said oil is the lifeblood of industrialised nations and has been the world’s most important source of energy since the mid-1950s. He noted that oil and related products underpin modern society, adding that Namibia should ensure the tenets enshrined in its exploration and production agreements are adhered to and complied with to the fullest to ensure maximum benefits for all. 

He further stated that opportunities for local employment would thrive in terms of technology and skills transfer, which is why organisations like the Petrofund are so important. Petrofund exists to train Namibians in the sector and have been doing so for decades. 

“Every operator pays into the fund as a requirement. It’s a billion dollar fund, so naturally, Namibians interested in the sector have a world-class avenue of oil and gas industry employment,” said Arowolo. 

 

Avoiding the resource curse

When asked about the danger of the discoveries turning out to be a curse, Arowolo said: “The idea that a resource can be a curse is not only counterintuitive but counterfactual in my opinion. There are laws already on the books that address all levels of mismanagement and corruption if that’s the implication that underpins the idea that a resource can be a curse. No country in the world occupies pristine space but I believe that Namibia is ahead of the game in this regard.”

During a meeting with stakeholders in February this year, mines and energy minister, Tom Alweendo, said discovering oil need not be a resource curse, which is also known as a paradox of plenty. The resource curse usually refers to the failure of resource-rich countries to benefit fully from their natural resource wealth, and for governments in these countries to respond effectively to public welfare needs.  “Once a discovery has been confirmed, we will have to discuss it judiciously for it not to be a resource curse,” said Alweendo. He also emphasised the need for local oil and gas industry skills to support any industrial activity. 

When quizzed about a potential contradiction between Namibia’s renewable energy aspirations and the discovery of fossil fuels, Alweendo said: “To me, there is no contradiction.” 

He explained that any energy transition from fossil fuels to renewables would have to be a just transition. “Fossil fuels can help Namibia’s energy transition into renewables…. Obviously, we are aware that eventually fossil fuels will be entirely phased out,” said Alweendo. The minister highlighted that any transition to renewables will be a costly exercise for Namibia, which is where some of the revenue generated through fossil fuels would be utilised. 

 

The disciplined path 

During a recent interview with the African Energy Chamber, former United States assistant secretary of state for energy resources and current managing director of Fannon Global Advisors, Frank Fannon, advised Namibia’s leadership to remain focused on deriving maximum benefit from the recent discoveries. 

“With a discovery of this potential significance, there are often political voices that would like to start spending money and accelerate timelines or cut corners to meet political rather than business cycles. I would encourage the country to stay on a disciplined path. To focus on the technical elements, safety, and environmental performance, among others. The world, investors, and the broader industries are watching how Namibia manages this discovery. It will be important that the country and the private sector execute the plan.”

Fannon also encouraged Namibia to integrate the best elements of an oil industry and reject the bits that compromise the country’s values. 

“We know that Namibia wants to increase foreign investment. Identify and integrate those factors into legislation. The country would also like to ensure a long-term industry. The regulatory context and fiscal regime should incentivise those goals rather than short-term returns. Further, since resource projects – oil, gas, mining – are long-term investments, all market participants should expect certainty in decision making,” said Fannon.  He also noted that current high oil and gas prices around the world have underscored the need for oil and natural gas for many years into the future. 

“The transition away from oil will take many decades, and it will be uneven with certain regions able to transition sooner than others. Yet, increasing calls to address climate change and transitioning away from hydrocarbons are very real. The market, investors, shareholders, and the public more broadly, will increasingly demand that those hydrocarbons be produced safely and environmentally sustainable. I suspect that concepts align with most Namibians, particularly given the importance of tourism. It will be important for Namibia or any other project in the world to demonstrate that it is operating with the environment in mind and with the highest standards,” Fannon concluded. 

 

Namibia’s current legislation governing petroleum exploration and production activity are quite robust. These include:

• The Constitution of the Republic of Namibia 1990 (the ‘Constitution’); 

• The Petroleum (Exploration and Production) Act 1991 (Act 2 of 1991) (the ‘Petroleum Act’);

• The Petroleum (Taxation) Act 1991 (Act 3 of 1991) (the ‘Taxation Act’) as amended by the Petroleum Laws Amendment Act of 1998; — The Water Act 54 of 1956;

• The Atmospheric Pollution Prevention Ordinance  

11 of 1976; 

• The Prevention and Combating of Pollution of the Sea by Oil Act 6 of 1981; and 

• The Environmental Management Act 7 of 2007.


2022-03-18  Edgar Brandt

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