By Edward Shati
This development has drawn massive attention nationally and internationally because of the recently discovered large deposits of at least 11 billion barrels of light oil and up to 8.7 trillion cubic feet of gas supplies in the country.
The freshly emerging sector promises new opportunities intertwined with varied challenges that are inclined to redefine Namibia’s energy perspective.
Understanding petroleum risk
Oil and gas exploration is a naturally high-risk investment, and Namibia has some complex geology, which makes discovery hard and expensive. Most companies can invest huge amounts of money in exploration activities and, in the end, find no feasible deposits; hence the geological risk may be huge. In January 2025, the oil giant Shell wrote off US$400 million for their offshore oil exploration due to the oil’s lack of commercial viability.
Chevron also reported in that same month that it had failed to locate economically viable oil in the well it was exploring in the Orange Basin. This events further emphasizes the risk and unpredictability of oil exploration, which the Namibian government cannot afford.
Also, there are financial risks given the fact that the oil projects require huge capital investment with long development time frames before actual production starts. Investors always seem to live in the shadow of price volatility, as global oil markets suddenly shift, rendering projects infeasible.
Coupled with this, Namibia has its political landscape, which inherently bears political risk. Priorities could shift, and the regulatory environment may shift in a way that can alter how industry operations are conducted.
Operationally too, the process becomes so much more complex in tough environments like Namibia; it requires advanced technologies and expertise.
Government interests and international agreements
The government of Namibia plays a leading role in regulating its oil industry. According to the Constitution, all-natural resources, including petroleum, shall be owned by the State.
It exerts this ownership through the government, the Ministry of Mines and Energy, and NAMCOR. The Namibian government has adopted a national model to ensure industrial development in partnership with international oil companies. These are developed through licensing rounds; whereby different companies get the rights to explore and produce.
Whereas IOCs are taking financial and technical risks in exploration, the state retains regulatory authority and often participates in projects through minority stakes held by NAMCOR. These twin approaches allow the government to gain control of the resource while drawing on IOCs’ expertise and investment capability.
Legal and fiscal regimes
The legal environment in Namibia is particularly guided by the Petroleum Act of 1991, controlling the exploration and production of oil. On the other hand, interested companies are supposed to operate under set licensing terms that define their responsibilities on environmental standards, local content, and government revenue arrangements.
Another important instrument through which the wealth of resources is controlled is the fiscal regime of the country. Such examples include royalties and corporate taxes. Through both mechanisms, coexistence with the state and good value capture from petroleum activities occur. Taxes and royalties allow an immediate stream of revenues to the government; thus, royalties will permit a stream to the state of profits derived from commercial activities.
Whose oil is it?
Whereas the Constitution provides clearly that oil ownership in Namibia rests absolutely with the state, this resource is exploited by private commercial actors. The fact is that such ownership has to be translated into real benefits through a well-managed process: effective management, strategic partnership, and strong legal and environmental frameworks.
If each of these factors is handled thoughtfully, Namibia has the potential to use its oil resources as a driver for sustainable economic development.
*Edward Shati is a Chevening Scholar at the University of Aberdeen, pursuing his MSc in Energy Economics and Law. This article represents his own personal opinions.
