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Parliament’s 51% oil sector equity demands disastrous- Namcor

July 08, 2022
Parliament’s 51% oil sector equity demands disastrous- Namcor

The National Petroleum Company of Namibia (Namcor) says calls by the Parliamentary Standing Committee on Natural Resources to increase its equity in oil exploration activities to over 50% from the current 10% are ill advised and will have disastrous consequences for the emerging sector.

"We do not support such a proposal; it will kill off the oil exploration industry overnight. That proposal is ill advised and will make us an international laughing stock. Namibia is not the first country to discover oil, there’s nothing new under the sun. We should be very careful to make proposals or enact laws that will make Namibia less competitive for exploration or stall the development and production of the recently discovered resources. A few countries have attempted similar proposals that have led to unfavorable and disastrous outcomes,” Namcor Managing Director Immanuel Mulunga told The Brief.

He said the current scenario, where the company has a 10% equity in all licenses issued, with additional revenue coming through levies and taxes for the government, was a beneficial arrangement for the country.

“Namcor participation is not the only way that the state and Namibians would benefit from our oil and gas resources. Government receives royalties and various taxes which together with Namcor’s equity puts the Government take already at 65%,” Mulunga said.

Petroleum Commissioner, Maggy Shino, told The Brief that Namibia could still increase its equity participation in on-going oil exploration, on condition it will be able to contribute towards exploration activities.

“The option for Namibia to increase its equity in any licence by increasing its participation is always there. The decision to exercise it lies purely on the ability of Namcor balance sheet to provide the capital required to fund 51% of exploration cost or for Treasury to provide funding for these operations. It is worth noting that oil and gas exploration is a very capital-intensive undertaking associated with very high risk. Additionally, Namcor holds a minimum of 10% in ALL existing licences and with up to 70% equity in three additional licences which they operate. This in overall makes the Namibian government through Namcor as the largest equity holder in oil and gas licences in Namibia,” she said.

On accusations levelled by Committee Chairperson Tjekero Tweya that the Mines Ministry had secured a raw deal for its oil equity participation, including its 10% shareholding in ReconAfrica, currently carrying out exploration activities in the Kavango, Shino said, “the Ministry has negotiated a robust deal for the maximum benefits to the Namibian government with very minimal risk exposure and no capital requirements.”

“ With this approach we have secured a government take from the overall project revenue of about 60% depended on the crude oil prices. This is composed of Namcor free carried participation, petroleum income tax, royalties and additional profit taxes.”

According to Mines and Energy Minister Tom Alweendo, Namibia is set to collect 55% of all revenues to be generated from oil through taxes.

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.

The state-owned oil company 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.

 

 

 

 

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Last modified on Wednesday, 13 July 2022 09:26
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« GIPF open to increasing MTC stake Alweendo defends Namcor’s venture into fuel retailing, rules out increase in dealer margin »

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