In February 2022, oil giants Shell and TotalEnergies announced significant deep-water oil discoveries off the Namibian coast, with oil production expected to start in 2026. The light crude oil was found in the Orange Basin, which is located 270km away from the diamond mining town called Oranjemund, near the South African border. Initial estimates are that Namibia could hold 11 billion barrels of oil, just behind Angola which has 13 billion barrels. Oil contributes roughly $20bn to Angola’s total GDP of $62bn and could potentially triple Namibia’s GDP from $11bn in 2020 – a huge boost.
Namibia should increase its stake in the joint ventures
The National Petroleum Corporation of Namibia (NAMCOR) has a 10% stake in the Petroleum Exploration License 39 (PEL 39) while Shell and QatarEnergy have 45% each. NAMCOR and QatarEnergy are also JV partners in the TotalEnergies project.
The question is: why has Namibia taken such a small stake? Was their bargaining power impacted by the history of dry holes in previous exploration projects? Can they legally ask for more? We think the Ministry of Energy and Mines and NAMCOR should go back to the negotiating table and ask for more, or at least try.
Lessons from Angola and Namibia
Both Angola and Nigeria have earned billions of dollars from oil revenues over the years, but little of this has uplifted the living conditions of ordinary citizens. Both countries rank low on the Transparency International Corruption Perception Index; Angola is 142nd and Nigeria 149th. If Namibian citizens hope to benefit from future oil revenues, they need to ensure that the arms of government are strengthened in the next four years to prevent corruption seen in the other African oil giants.
There have been worrying signs that corruption is becoming more widespread as Namibia’s rank on the Corruption Perception Index has dropped from 45th in 2015 to 58th in 2021. One of the contributing factors of this deterioration was a massive fish scandal which saw cabinet ministers and other government officials from both Namibia and Angola siphon millions of dollars from the Namibian state fisheries company. If government officials are stealing from the fisheries industry, what more oil? Namibia needs to get its house in order before it starts raining petrodollars.