Namibia should swiftly implement a string of reforms to allow the country to benefit from its oil find, economic advisory firm Simonis Storm has warned.
“The estimated oil revenues might entice the government to be more proactive in improving the ease of doing business in Namibia, implement special economic zones, remove policy uncertainty and improve immigration access to skilled foreigners. These structural reforms could come about speedily at the demands of transnational oil companies prior to oil production taking place in Namibia,” Simonis Storm said in its latest report on oil discovery in Namibia.
The research firm’s Economist Theo Klein added that the proposed structural reforms will not only make it more appealing for oil companies to set up shop in Namibia, but will also attract foreign investors in other sectors of the economy, resulting in the development and advancement of other industries.
“We believe Namibia could avoid the resource curse only if the above-mentioned structural reforms are implemented. The economy has not diversified away from primary economic activities over the last 30- years, so what will change when oil revenues are added to the picture? However, structural reforms will allow alternative sectors to increase their shares of employment and GDP over time,” he said.
A global energy research and consultancy group Wood Mackenzie recently noted that Namibia’s oil discovery might be Sub-Sahara Africa’s biggest to date and estimates over US$ 3.5 billion annually in taxes and royalties for the Namibian government.
The firm also expects Namibia to be the third largest oil producer in the region within 10 years, producing 250,000 bpd in its first phase (to be the third biggest oil producer in Africa, Namibia would have to produce about 2.8 million bpd currently).
At the same time, Namcor estimates that the country could generate over US$5.6 billion in annual revenues from oil, according to a Bloomberg interview.
Meanwhile, the Simonis Storm report also estimates potential oil revenue to the Namibian government based on some assumptions that would leave Namibia with oil revenue generation opportunities until 2050.
The assumptions mentioned by the firm include Namibia taking eight years to put oil extraction and export contracts and infrastructure in place. Oil demand remains balanced with a modest pace of energy transition taking place globally, ensuring a market for petroleum products for the next 20 years (especially for developing nations who lag behind advanced economies in energy transitioning).”
Risks to the above estimates being achieved include Namibia not being able to sign contracts with foreign firms in a reasonable time and allowing these firms to construct the necessary infrastructure to extract and export oil, according to the report.
This comes as oil discoveries were made at the Graff-1 and Venus Wells off the coast of Namibia in the Orange Basin in early 2022.
This is 94-years after the first oil exploration in Namibia. The recent findings estimate about 3 billion barrels in reserves (31 days of global demand) at TotalEnergies’s Venus well, with no estimates of Shell’s Graff-1 well yet.
However, an updated geological assessment would need to confirm the accurate level of reserves, as the 3 billion barrels is a conservative estimate at this stage.
