Namibia Accelerates Development Towards First Oil

In an exclusive interview with Energy Capital & Power, Maggy Shino, Petroleum Commissioner of Namibia’s Ministry of Mines and Energy, discusses the country’s efforts to fast-track development of breakthrough discoveries in the Orange Basin

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What does the pathway to first oil look like for Namibia? Are there any updates on the technical and commercial viabilities of the recent discoveries?

Namibia has been on a roll since 2022, in that nearly every hole that has been drilled in the subsurface has yielded a positive indication of hydrocarbons. Between February 2022 and July 2023, we have had oil discoveries: the Graff-1, Jonker- 1X, La Rona-1 and Lesedi-1X discoveries in PEL 39 by Shell Namibia Upstream BV and its partners, and the Venus-1 discovery in PEL 56 by TotalEnergies EP Namibia and its partners. It has been a journey to get here – we drilled close to 37 dry wells prior to these discoveries. When the results were negative, it was very difficult to make the case to the world that Namibia does have oil and gas accumulation. These discoveries are a testament to both patience and hard work, as well as the potential of the market.

The plan for the Namibian government, the International Oil Companies and our partners is to accelerate development of these discoveries and to see first oil in Namibia. We have commenced appraisal work on the Graff-1 and Venus-1 discoveries and the initial results have been very encouraging. We are making ongoing evaluations to determine the exact size of these fields and continuously improve our estimates to determine commerciality. Shell’s Graff-1 discovery has been estimated to hold volumes ranging from 200 million barrels of recoverable oil reserves, while TotalEnergies’ Venus-1 discovery is estimated to have a potential to hold up to 2 billion barrels of recoverable oil reserves. Shell’s Jonker-1X discovery is estimated to hold an additional 300 million barrels of recoverable reserves.

In terms of the timeline, there are four drilling rigs currently operating in Namibian waters – the Deepsea Mira, Tungsten Explorer, Deepsea Bollsta and Maersk Voyager – which are working tirelessly to appraise these discoveries and determine how much oil will be able to flow to the surface and at the same time explore for more upside potential of these blocks. With this information, it will take another six months to gather all of the data and establish the size so that we can build the requisite infrastructure to develop these discoveries. To build this infrastructure, we need an influx of foreign direct investment into the industry. Once we have the infrastructure, we can then commence the production of Namibia first oil.

What are the priority areas for further exploration?

We have only scratched the surface of the hydrocarbon basin in Namibia. The offshore market is ready – and not just the Orange Basin. In terms of deep-water potential, the Lüderitz, Walvis and Namib Basins are highly prospective and share many characteristics of the Orange basin yet remain highly underexplored. Onshore, the Owambo and Nama basins are also underexplored, while exploratory drilling in the Kavango sub-basin has indicated the presence of an active petroleum system that could hold up to 30 billion barrels of oil. Our geological data confirm that there are still many prospects that are mapped with untapped reservoirs both onshore and offshore, and for that we will continue promoting the country’s petroleum potential.

What is the status of the Kudu development project and how does it align with Namibia’s gas agenda?

Kudu remains our national strategic project. The Kudu Gas field contains an accumulation of 1.3 trillion cubic feet (tcf) of natural gas, yet following recent hydrocarbon discoveries, Namibia’s estimated natural gas reserves within the Orange Basin could increase significantly because of the associated gas found within these recent discoveries. To harness the Kudu field reserves, we plan to build a floating production platform approximately 170 km offshore in the block by BW Energy (operator of the Kudu field). From this platform, we will construct a pipeline that will transport gas from the offshore field to Elizabeth Bay located near the town of Lüderitz on the southern coast of Namibia, where a gas to power barge will convert the natural gas into electricity. Namibia is well connected to the Southern African Development Community (SADC) region when it comes to power transmission and distribution. For Phase 1 of Kudu field development, we will generate up to 420 MW of electricity for domestic market consumption as well as regional via the SADC network. Phase 2 will commence thereafter to generate the full 820 MW.

We are now looking at the Kudu development project with a new vision because of the discovery of additional gas reserves. Natural gas is a clean energy source. With the production of electricity from gas, we will be able to provide an energy transition solution and lower our carbon emissions as a country and as a continent. Being a latecomer to oil and gas development means that we will be able to leverage new innovations and technologies in carbon emission reductions. We plan to utilize every energy resource that we have for the benefit of Namibians. When we are designing our energy development plan, we are building it with long-term ambitions. The Kudu field is the only solution that can provide us with baseload power, which will enable us to industrialize. Namibia is not just looking to turn on the lights – we are looking to become an industrial nation. For this, we need baseload power.

What steps has the government taken to ensure a sustainable balance between the needs of the oil and gas industry and the needs of the Namibian people?

While we are in the pre-production phase, the government is working to establish effective petroleum revenue management legislation. Economic benefits include the payment of royalties (5%), petroleum income tax (35%) and additional profit taxes which are negotiated, as well as NAMCOR’s participating interest ranging from a minimum of 10%. That being said, we must ensure that the economic value generated by the recent discoveries and ongoing exploration endeavours extends beyond short-term taxes and royalties and serves to create sustainable forward and backward linkages that benefit current and future generations. Local content is a must in Namibia – the Namibian oil and gas industry must be led by capable Namibian men and women. We are seeking to create a win-win scenario for both the industry and the Namibian government. Last May, we held a two-day stakeholder workshop seeking input on the draft National Upstream Petroleum Local Content Policy, with a view to ensuring that Namibians will participate and contribute meaningfully to the emerging oil and gas industry.

We are placing a strong focus on achieving value creation through local content. There are significant opportunities along the oil and gas value chain for Namibians to participate, especially in servicing the exploration sector. First, we need to build the capacity, both in the local workforce and in the institutions that will help oversee, develop and regulate Namibia’s oil and gas industry. We also have an obligation to share up-to-date information with the Namibian people so that they can prepare effectively for first oil production. The industry also has an obligation to ensure that knowledge and skills are transferred to build the capacity of Namibians. This will enable Namibian companies to participate meaningfully and add value to the projects. A much bigger obligation is further placed on the Namibian people to ensure that they equip themselves with the necessary skills required. The oil industry is a highly specialized industry with high standards for HSE, and we will not compromise on the international requirements. We must ensure that the industry has an effective local content policy and regulatory landscape so that Namibians reap the fruits of their labor. This is central to sustainable governance.

We would like to inform those envisaging to service the Namibian oil industry that local content is mandatory and that the Namibian government will not compromise in providing opportunities for its people to participate meaningfully in the industry. It is a common phrase from companies that are originating from developed economies that local content raises the cost of doing business. This is not true. As a matter of fact, if applied correctly, local content is a very effective cost-saving measure, and I therefore request all of you to make the utilization of Namibian goods and services, joint venture partnership with Namibian entities, and technology transfer an integral part of your businesses in Namibia.

What are your top energy development priorities between now and 2030?

In terms of energy diversification, Namibia is strategically positioned in that we have a wide range of energy resources, of which many countries can only dream. Our new discoveries of oil and the large volumes of natural gas, together with the existing renewable energies such as solar, wind, biomass and hydropower – then adding the new prospectivity of both green and blue hydrogen – provides a unique opportunity for Namibia to offer energy security to Africa. Because all of these resources are bountiful in Namibia, we have made a policy decision to utilize all available energy resources to achieve both energy security and advance our development agendas. This is clearly articulated in our National Integrated Resource Plan, which mandates that value should be generated by utilizing all our energy resources. With this approach, it will be possible for us to easily navigate the energy landscape that is constantly changing.

With these opportunities available, we are planning to provide baseload power to Namibia and the SADC region through Kudu gas-to-power. With the additional gas, our objective is to provide the world with low carbon emissions through the production of both green and blue hydrogen, and offer that to the export markets. Our focus right now is to build the infrastructures that are required for us to make all of this possible in the next two to three years, while still continuing to advance the renewable energy agenda.

This interview is featured in Energy Invest: Namibia 2023, the official investment report for the country’s energy and mineral resource sectors. The publication will be rereleased at the upcoming  Namibia International Energy Conference in Windhoek on April 23-25, 2024. To download a full copy of the report, please visit https://apo-opa.co/3SuujjX

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