Namibia is set to collect 55% of all revenues to be generated from oil through taxes, Mines and Energy Minister Tom Alweendo has said.
Research conducted by investment advisory firm Cirrus Capital revealed that the country has the potential to generate over N$500 billion in revenue in the coming decade through taxes and royalties from the oil sector.
“The model of the royalties and additional tax shows that we are going to get up to 55% of the revenue and on top of that, you also get the reward on the 10% should there be profit made. Therefore, one does not only get benefits from ownership but also the economic impacts from sources other than the reward,” Alweendo said.
He added that Namibia will also get additional income from the National Petroleum Corporation of Namibia (NAMCOR)’s 10% interest held in the recent oil finds.
The Minister noted that the government prepared and published the Model Petroleum Agreement to serve as a basis for negotiation with applicants for exploration licences.
“Another economic impact will be through value addition and other things that may arise within the oil and gas sector. This is where the issue of local content comes in; as in how much value can be created within the economy simply by looking at the oil and gas sector, which comes in terms of goods and services that must be provided to the oil industry,” he said.
“I think the value will come from the engineering services that must be provided to these companies, transportation, catering, and SOP that must be constructed.”
Alweendo’s pronouncements come amid concerns the government will generate fewer benefits from the country’s two offshore oil discoveries.
NAMCOR estimates that Namibia could generate US$5.6 billion in revenue for the country at peak production from its two oil finds, which have the potential to double the country’s economy, which Bloomberg estimates at US$11 billion by 2040
NAMCOR 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.
Since independence, exploration companies have invested more than N$30 billion in Namibia, according to the Namibia Petroleum Operators Association.
Consultants Woo Mackenzie estimated the combined recoverable finds at almost four billion barrels.
Contrary to expectations that Namibia could reach production by 2028 if the process is accelerated, Cirrus Capital expects oil extraction to take between seven and 10 years if the commercial viability of the find is confirmed.
