November 01, 2024
Economy

Oil discoveries to boost Namibia's GDP to US$37bn

July 27, 2023
Oil discoveries to boost Namibia's GDP to US$37bn

Namibia could register a gross domestic product (GDP) of U$37 billion at peak production level from the country's newly discovered oil reserves, an official has revealed.

The latest revelations come as authorities in the country are optimistic about the future economic prospects following the discovery of oil by Qatar Energy, Shell, and Total Energies in the Orange Basin, offshore Namibia near Lüderitz.

According to the National Petroleum Corporation of Namibia’s (NAMCOR) Acting Managing Director Shiwana Ndeunyema, at the peak of production level, the country will also benefit from direct jobs and local businesses will get a boost through procurement.

"It is good to generate more money, but this will be an enormous amount of money which needs to be wisely invested and one best way is through a sovereign fund. However, such funds if channelled back can also spike inflation as it will be too much, thus, it requires careful planning and execution to avoid a resource curse," he told a discussion on the Impact of Oil and Gas Discovery in Namibia hosted by the Stellenbosch Business School in Windhoek.

"About 3,600 jobs will be created, and if I was an artisan, I would start looking at subsea welding or other activities, so that I can prepare instead of focusing on the broader blank sector. It is therefore very important for the nation to acquaint itself for full benefits, especially the steel industry," he added

In addition, he said though oil brings economic sustainability, increased household spending due to high-income inflows can raise inflation and cost of living, as these investors will spend and get what they need at whatever cost thus raising prices of everything which then leads to widening the gap between the rich and poor.

Ndeunyema said Namibia is poised to receive benefits of up to 54% when the production of the recently discovered oil reserves commences six years from now.

He made these remarks justifying NAMCOR's 10% free-carry stake in the joint-venture oil exploration and appraisal with Qatar Energy and Shell, which has discovered four wells about 270km offshore Namibia's coast.

The nation has been concerned with the 10% shareholding, arguing that it does not really represent the populace's interest and benefits from its natural resources.

The joint-venture group comprises Shell Namibia B.V (45%), QatarEnergy (45%) and NAMCOR (10%).

"We see people frowning at the 10% shareholding, but in essence, we tend to benefit about 54% when production begins, as the state will be able to generate revenue through employment, royalties, taxes, petroleum income tax, profit tax and annual licence fees. So, all these are benefits that we shall gain, thus our shareholding is not peanuts as per se," said Ndeunyema.

He added that NAMCOR carries interest on behalf of the State even though it does not make any monetary contribution, but rather participates in technical aspects.

"We have a situation where the cost of exploration is recovered in production, through a cost recovery programme. However, the challenge is if you don't have an entity such as NAMCOR to serve as the custodian of the State's interest some of these costs can be inflated. We see this in other countries where they come and spend recklessly, but what we don't realise is that we are taking away from that revenue which is supposed to be channeled to the state. So, it is NAMCOR's role to sit alongside these super mergers to advise on technical and cost matters thus matching resource maximisation," he stressed.

He revealed that TotalEnergies had sourced N$5.5 billion to appraise Venus, hence encouraging technical people to study and research how they can partake in the industry to also benefit.

"You won't see the value directly because it happens offshore, therefore there is a need to unpack the oil value chain in an effort to identify opportunities," he said.

"Therefore, the state needs to identify an ideology in the oil and gas sector so that it can co-exist with other renewable resources as the world moves away from fossil fuel. Also, we must have a roadmap on what spending on infrastructure such as housing, schools, healthcare and roads. Further, unpack the value chain to have a full understanding on leveraging from the sector."

Ndeunyema also revealed that Namcor is currently crafting a seven-to-20-year master plan defining its role and significance in the oil sector.

He, in the same vein, cautioned that the government should not be over-reliant on oil making it the anchor of the economy because there might be dire consequences when the sector collapses.

"Learn what happened to Angola where 50% of its budget was heavily reliant on the oil sector, so when the economy melted, it experienced a deficit. Namibia should learn and avoid this scenario, rather remain diverse by continuing to develop the agricultural sector, mining, and tourism," he warned.

 

 

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Last modified on Sunday, 30 July 2023 00:00
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