November 01, 2024
Economy

BoN calls for transparency in oil and gas licensing

November 03, 2022
BoN calls for transparency in oil and gas licensing

The Bank of Namibia (BoN) has called for a review of the country’s oil and gas exploration licensing to allow for more transparency and accountability. 

The central bank proposes the introduction of an Excluded Parties List System, an electronic directory of individuals and organisations, which would be excluded from being allocated EPLs because of their relationship and proximity to officials in the Ministry of Mines and Energy. 

BoN's Director for Research and Financial Development Emma Haiyambo, who gave an overview of Namibia's oil, gas and energy resources at the central bank's Annual Symposium on Wednesday, said Namibia needs to review the current mineral royalties and taxes to ensure a balance between attracting investors and ensuring the country's optimal benefits from the resources. 

"The issue of ensuring optimal local content in the exploitation of the resources must remain prominent. There should be targeted incentive packages to reduce the investment risks faced by early adopters in the green hydrogen initiatives. Cooperation on energy infrastructure development at a SADC regional level should be prioritised," she said.

At the same event, BoN Governor Johannes !Gawaxab highlighted transparency and accountability in allocating resources as a critical success factor, which he said would ensure that access to these resources is granted in such a way that prevents mismanagement and other abuses and that the benefits trickle down.

"How do we do this, you may wonder? Firstly, we need to ensure that Namibians and firms seize opportunities to provide services to these industries. Secondly, the allocation of these resources should be in a transparent manner; it should be done through an auction or open market bidding. Well-designed auctions can promote the efficient allocation of resources without requiring governments to have full prior knowledge of resource values or costs," he said. 

!Gawaxab shared some critical success factors that the country should embrace to ensure benefits for all Namibians as the question in the mind of every citizen is how, Namibia as a country, expects to gain from these new oil discoveries. 

He said one of the most immediate ways should be through skills development, direct and indirect employment and infrastructure development for the local citizens. 

"Exploration activities should also generate new infrastructures such as roads, railway lines, electricity supplies, schools, and hospitals that, although provided for the minerals industry and its workforce, can also benefit the rest of the population. It should contribute to developing skills and local businesses at the local level. Skills development should entail using the migration policy to facilitate skills transfer and the acquisition of skills that are not locally available," he said.

He additionally noted that the economy can be stimulated as mineral companies forge multiple outward linkages backwards to industries that supply goods and services or forwards to industries that process mineral outputs. 

"The issue of ensuring optimal local content in the exploitation of resources must remain prominent. The finalisation and adoption of the Local Content Policy is therefore

of paramount importance. Facilitating local content and participation in the oil and gas value chains has the potential to ensure broad-based benefits from these resources. To avoid and prevent the much dreaded “resource curse” that has plagued many developing countries with newly discovered natural resources, the private sector will need to capitalise on these opportunities," he said. 

The Governor, in agreement with Haiyambo, said compared with administrative allocations of licences, auctions are more transparent, less dependent on officials’ subjective judgement, and can yield more significant revenues or cost savings for governments. 

Meanwhile, Minister of Mines and Energy Tom  Alweendo believes that future successful investments in Namibia's natural resources will be those that are able to re-imagine their businesses. 

He said the successful and sustainable ones will be those that are able to deliver on both making a profit for their shareholders and positively impacting societies where they invest and operate. 

"This will happen only when investments in our natural resources include a commitment and investment plan to make life better for the communities where we operate. This plan should include providing decent jobs, respecting local and community cultures and customs as well as immersing oneself as a corporate member of that community and contributing to the broader advancement of that community," he said. 

Global oil majors, TotalEnergies and Shell announced earlier this year that they had made “significant” oil discoveries off Namibia, which the National Petroleum Corporation of Namibia (Namcor) estimates could generate US$5.6 billion in revenue for the country at peak production, which have the potential to double the country’s economy, which Bloomberg estimates at US$11 billion by 2040. 

Consultant Wood Mackenzie estimates that Namibia discoveries could contain about 6.5 billion barrels of oil equivalent of recoverable reserves.

 

 

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Last modified on Friday, 11 November 2022 00:43
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