November 01, 2024
Economy

Will oil, Green Hydrogen provide the boon for the South

April 01, 2022
Will oil, Green Hydrogen provide the boon for the South

The country’s Southern region is expected to benefit from a huge influx in investment inflows and increased employment opportunities following the discovery of oil and plans by the government to attract Green Hydrogen projects in the region, but concern is that the jobs may be temporary.

“There will be benefits. More economic activity will create more jobs. However, there is a danger that with both green hydrogen and oil most of the jobs will be created during the construction phases and that later on the projects will only sustain a limited number of mostly specialist positions. Both projects need to have components that will emphasise job creation for residents of the south,” Institute for Public Policy Research (IPPR) Executive Director Graham Hopwood told The Brief.

He said the government needs to start working on policy reforms to ensure the region in which resources are found, benefits and that the country’s existing laws create an environment of transparency and accountability on income generated. 

“There is a risk that the whole of Namibia will not feel much benefit if funds are siphoned off for a corrupt political elite. We need to work on a plan now that will ensure Nigeria, Angola, and Equatorial Guinea type scenarios do not develop here. That is why we need to have strong governance systems in place for our extractive industries, which emphasise transparency and accountability,” Hopwood said.

“Our petroleum and minerals laws are outdated and reforms have been in the pipeline for more than a decade. In addition, the IPPR believes that governments should join the Extractive Industries Transparency Initiative (EITI) - a global standard for good governance.”

He said there is a possibility the government will look at reviewing upwards its shareholding in the on-going oil exploration in the south when oil reserves have been confirmed.

“A production licence will be negotiated once a PEL's reserves are proved to be commercially viable. I doubt whether the government or Namcor stake would stay at 10 percent. It will be up to the government to negotiate a good deal for Namibia - which brings a range of benefits. However, the oil companies involved may claim that oil's prospects are dimming due to climate change and that therefore the riches that some might expect to pour from this project will be limited,” the IPPR Director said.

“The presence of Namcor in various oil exploration blocks is at least better than having briefcase companies belonging to politically connected Namibians involved in the licences - which has been the case in the past.”

Former Director at The Namibian Economic Policy Research Unit, Prof Henning Melber also alluded to the investments likely creating temporary employment, while acknowledging the infrastructure benefits that will come with the development of the two projects. 

“All these big scale projects also require massive infrastructure investments. This could mean that a port like Luderitz is one of the local beneficiaries. But again, a closer balance will have to look not only into benefits but also setbacks such infrastructure might create. The ultimate consideration should ideally be to what extent the local residents benefit from such investments and who pays for the bills such investments bring along too,” he said.

He said priority should be given to the development of agriculture projects in the south, making use of the Neckartal Dam, initiatives which Melber said will have long term economic impact for the local community.

“It might be a serious alternative to make best use of what has already been established locally, such as the Neckartal Dam. Investments into the stage 2 development of farming under irrigation would finally make use of the most precious source of water and for the benefit of local farmers. The investment would create agricultural production with local people trained and empowered to make the best use of land and water. It should develop local infrastructure, including supply chains for market access, and thereby create a win-win situation. It would be a step in the direction of Vision 2030 by contributing to local self-sufficiency in food production. The main market would be local (with fruits and vegetables for consumption country-wide) and thereby also ecologically leaving not too big carbon food prints. Such investments would empower the local communities far more than any other resource extraction, which is now celebrated as if it would be the solution to all problems. - These might well turn out to be another big problem instead,” Melber said.

The National Petroleum Corporation of Namibia (NAMCOR) and its partners, Shell Namibia Upstream B.V and Qatar Energy’s Graff-1 well are said to have proved 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.

Although there are no exact estimates of Namibia’s oil find, with the spudding of an appraisal well expected to have started, suggestions are that it could hold about 400 million barrels of oil, possibly more, some 100 million barrels larger than it was previously suggested.

Namibia has sought to develop oil and gas fields for decades with no success and the potential oil find could prove to be a game changer for the country.

Hyphen Hydrogen Energy, which has won two bids to construct Namibia’s inaugural green hydrogen projects, is targeting to produce 1Gigawatts of electricity and create over 15 000 jobs,

20% of the jobs will be made available to the youths as part of conditions given to the developers, with 93% of employees to be Namibians, with average salary set at N$151 941 per annum.

The government is banking on green hydrogen to attract more than US$6 billion in foreign direct investment (FDI) which is anticipated to generate annual revenues in excess of US$800 million, while also contributing to its much-anticipated Sovereign Wealth Fund.

 

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Last modified on Tuesday, 05 April 2022 00:29
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