Namibia is making significant strides in its oil and gas sector, with a legal overhaul underway to create a more attractive environment for international investors.
This was the key takeaway from a presentation delivered by Shakwa Nyambe, Managing Partner of SNC Incorporated, at the recent Africa Energies Summit 2024 in London.
Nyambe highlighted the government’s review of the current petroleum legal framework, aimed at fostering investment and growth within the sector.
The review according to Nyambe, encompasses the potential introduction of new regulations for exploration and production activities, alongside amendments to the fiscal terms governing petroleum exploration and production in Namibia.
“We’re looking at potentially introducing detailed regulations for oil and gas exploration and production. These regulations would cover everything from development plans and work programs to drilling operations, surveys, and more. There’s also a chance we’ll see changes to the tax and royalty structure for the oil industry, especially considering Namibia’s first oil production is expected by the end of the decade,” Nyambe said.
While the specific details of these potential changes are yet to be finalized, Nyambe also highlighted that the Petroleum Act in its current form does not have specific provisions for the development of natural gas fields. This is more definitively covered in the Model Petroleum Agreement.
He emphasized that as a potential gas-producing region, the Model Petroleum Agreement also ought to undergo reviews and amendments.
He however, advised that it would be beneficial to legislate some of the provisions for the development of gas fields rather than leaving these to be fully negotiated under a contractual regime.
“I strongly believe we should include stabilization clauses. These clauses are essential to give international companies and investors the confidence and security they need. Especially in developing countries, there’s always the risk of political upheaval or sudden changes in laws. Stabilization clauses would shield them from such risks. These clauses also work hand-in-hand with other established investment law concepts, like fair and equitable treatment, full protection and security, and protection against expropriation,” he said.
Nyambe also recommended the establishment of an independent regulator for the upstream oil and gas sector.
According to him, the establishment of an independent upstream oil and gas regulator would greatly benefit the country as it would ensure impartiality and transparency in decision-making processes, thereby reducing the potential for conflicts of interest or direct political interference.
“An upstream regulator will oversee the licensing and permitting process for oil and gas exploration and production activities. These will include evaluating applications, setting criteria for qualification and granting licenses. An independent upstream oil and gas regulator will also carry out other functions, which will include monitoring petroleum activities, technical and safety compliance with laws, environmental protection, and issuing guidelines or notices,” Nyambe said.
Moreover, Nyambe’s presentation suggested a focus on streamlining the exploration process and potentially introducing a bidding system for certain oil and gas licenses.
“I propose we move towards license bid rounds. These would be announced publicly at regular intervals, giving companies a fair shot at competing for licenses. This system allows the government to carefully assess the financial muscle and technical expertise of potential investors. By making the process highly structured with clear criteria and timelines, we can ensure only qualified and capable companies get licenses. This transparency also helps reduce the risk of any shady dealings,” he said.
His presentation also covered the importance of local content in Namibia’s petroleum industry. He stressed the need for a clear and stable regulatory framework to support local content requirements.
According to Nyambe, this framework should identify specific sectors for developing local capacity, maximize employment and development opportunities for Namibians, enhance local supplier participation across the value chain, and promote Namibian ownership and financing at all levels of the industry.
“We need to make sure this oil and gas industry benefits Namibians too. That’s why I’m advocating for in-depth studies to identify exactly where this industry can create the most positive impact for our people. These studies would involve looking at our current industrial base and the vocational skills our workforce already has. With this knowledge, we can then draft a clear regulatory framework, developed through discussions with all the relevant stakeholders. This framework would ensure local companies can participate and Namibians have the chance to develop the skills they need to succeed in this new sector,” Nyambe said.
