Namibia must identify and resolve the key outstanding issues in negotiations with oil operators before pushing for final investment decisions (FID) on discoveries in the Orange Basin, former mines and energy minister Tom Alweendo has said.
Alweendo said pressure to accelerate FIDs should be balanced against the need to ensure that unresolved commercial and regulatory issues are properly addressed and that the eventual agreements serve Namibia’s long-term interests.
He stressed that FIDs are ultimately made by oil operators rather than the government, with companies expected to commit to developments only once they are satisfied with the terms reached through negotiations.
“The government is not the one to make FID. It’s the operators that must make FID, but they are going to make FID only when they are happy with the terms they’re getting in negotiations,” Alweendo said at the RMB and FNB Strategic Thought Leadership Summit.
Alweendo, who is now founder and head of Alvenco Advisory, said the focus should therefore be on determining which critical issues remain unresolved and what needs to be done to conclude negotiations.
He said greater clarity around the outstanding issues would also allow the public to better understand what is preventing projects from advancing towards investment decisions.
“But I don’t really want to give or put undue pressure on the negotiations until one day I know what are the critical outstanding issues. So that this is known to the public, what do we need to do?” he said.
However, Alweendo cautioned that resolving outstanding issues should not become an excuse for negotiations to continue indefinitely.
He warned that prolonged talks could increase project costs and potentially result in Namibia losing investment opportunities as operators weigh competing projects elsewhere.
“I don’t think it will make any sense to drag out the negotiations to the extent that then you lose opportunities, because the longer you take to make a decision obviously is also the higher cost,” he said.
Namibia is seeking to move major offshore discoveries in the Orange Basin from exploration and appraisal towards development, with FIDs expected to unlock significant capital investment and demand for goods, services and skills.
Alweendo said negotiations should involve all relevant parties and should seek to strike a balance between protecting Namibia’s economic interests and establishing commercially viable conditions for investors.
He also cautioned Namibian businesses against waiting for negotiations and FIDs to be concluded before preparing for opportunities in the petroleum industry.
“I know of Namibians who are already moving, who are building their businesses, who are building capabilities,” Alweendo said.
“Because if you wait until everything is dotted, everybody is agreed, it might be too late for you even to get into the sector anymore.”
He said local businesses would have to accept some degree of risk in building capacity before there was certainty over the timing of petroleum developments.
Alweendo said financial institutions should similarly begin assessing opportunities in the emerging sector before FID rather than waiting for projects to reach production.
On local content, he said Namibia should focus on creating commercially competitive domestic businesses capable of participating in the petroleum value chain without imposing requirements that undermine the viability of projects.
He said the broader objective should be to ensure Namibia captures greater economic value from its petroleum resources while maintaining conditions capable of attracting the investment required to bring discoveries into production.
