Popular Democratic Movement (PDM) leader McHenry Venaani has called for a review of all oil exploration and extraction deals amid allegations the government could have negotiated in bad faith.
Bloomberg estimates Namibia could generate US$11 billion by 2040 from its two oil finds, which have the potential to significantly grow the country’s economy
Venaani singled out the recent deal in which the government only emerged with a 10% shareholding in a landmark oil discovery offshore Namibia’s coast that is holds through the National Petroleum Corporation of Namibia (Namcor).
“This is but one documented example of the government having negotiated in ill-faith. By this virtue, I hold the strong assertion that the oil agreements must be renegotiated in good faith and from a point of departure that respects the principle that the oil reserves and proceeds ought to benefit the current and future generations of Namibia,” he said in a letter addressed to Mines and Energy Minister Tom Alweendo.
The leader of the official opposition party added it was of grave concern that Namibia has a meagre 10% shareholding in the exploration block 2913B, while companies such as Total Energies as an operator holds 40%. Its partners Qatar Energy 30% and Impact Oil and Gas 20%.
“Wrongly structured oil exploration agreements have far-reaching consequences. These unethical practices have grown even larger to the extent that it threatens to hamper development and growth domestically and continentally. It goes without saying that corruption is rife in Namibia and if we conclude agreements that are not favorable to the developmental objectives of the country, our oil resources will not benefit the people of this Republic,” Venaani said in the missive.
“It is against the backdrop above and in line with national interest that I write to request that all existing and new oil exploration and extraction agreements concluded by the Ministry of Mines and Energy be availed to the office of the Official Opposition.”
Venaani’s calls for an upward review of Namibia’s shareholding comes as the Parliamentary Standing Committee on Natural Resources in July also demanded that Namcor increase its equity in oil exploration activities to over 50% from the current 10%.
Committee Chairperson Tjekero Tweya apportioned the blame for Namcor’s low shareholding and lack of financial benefits on the Mines and Energy Ministry, which negotiated the stake on behalf of the government, an accusation it has denied.
Namcor has maintained that any calls to increase its equity in oil exploration activities to over 50% from the current 10% are ill advised and will have disastrous consequences for the emerging sector. At the same time, Alweendo has previously stated that Namibia will collect 55% of all revenues to be generated from oil through taxes through the current agreements.
The state-owned oil company and its partners, Shell Namibia Upstream B.V and Qatar Energy, are said to have discovered a working petroleum system for light oil in the Orange Basin, 270 km from the town of Oranjemund, where drilling operations commenced in early December 2021 and were safely completed in early February 2022.
The company’s other partners, TotalEnergies, alongside QatarEnergy, and Impact Oil and Gas have also announced the Venus-1X discovery, located approximately 290 kilometres off the coast of Namibia, in the deep-water offshore exploration Block 2913B, which covers approximately 8 215 km².
Cirrus Capital in April forecasted that Namibia had the potential to generate over N$500 billion in potential revenues in the coming decade through taxes and royalties charged to the oil sector.
The investment advisory firm estimates Namibia’s oil industry has potential to double government revenues to N$100 billion, with total government revenue having amounted to N$53.6 billion in the 2021/22 financial year.
Cirrus Capital’s Romé Mostert, however, warned that the opportunity cost will be massive if Namibia makes a policy mistake and discriminates against investors.
