As Nigeria struggles to attract investment into its energy sector, Namibia, a country of about three million people, is getting attention from some of the biggest international oil companies (IOCs) to gradually revive its energy space.
Like Nigeria, Namibia is one of Africa’s exploration hot spots, motivated by the belief that subsalt prospects off the country’s coastal shelf geologically mirror Brazil’s giant subsalt fields.
But the southern African nation has suffered many setbacks in its decades-old hunt for oil and gas. However, the tides are changing.
Industry reports are emerging that the oil discoveries made offshore Namibia by Shell and TotalEnergies at the beginning of the year could hold much more oil and gas than originally expected.
According to the UK-based energy and intelligence provider, Upstream, Shell discovery, which was initially thought to hold 400 million barrels, could now hold as much as two billion barrels of oil, while the TotalEnergies well could hold as much as three billion barrels, developments that provide an estimated $3.5 billion annually in royalties and taxes for the Namibian government.
The intelligence publication further showed Shell is now considering adding a Floating Liquefied Natural Gas vessel alongside a crude FPSO vessel because the discovery could hold up to six trillion cubic feet (tcf) of natural gas,
This discovery, coupled with the country’s favourable regulatory environment, experts say, will create an influx of new investment, while also positioning Namibia as a highly competitive and increasingly lucrative upstream destination.
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“This discovery offshore Namibia and the very promising initial results prove the potential of this play in the Orange Basin, on which TotalEnergies owns an important position both in Namibia and South Africa,” Kevin McLachlan, Senior Vice President Exploration at TotalEnergies said on CNBC.
Both the Shell and TotalEnergies discoveries have not only demonstrated the significant potential of Namibia’s offshore basins, but are expected to spark further international and regional interest in the Namibian upstream market, while also making a strong case for oil and gas exploration in Africa in 2022 and beyond.
Olayinka Arowolo, the chief executive officer of local oil exploration company, Nabirm, welcomed the development, as the country continues to unlock the multi-billion-barrel potential of its acreages.
“In my opinion, surrounding prospects could represent areas of significant potential and I am looking forward to more discoveries across multiple basins on and offshore,” Arowolo told New Era.
Unlike Namibia, Nigeria is punching below its weight in terms of attracting the right kind of investments in its energy sector as a foreign investment now accounts for just a fraction of Africa’s biggest economy, with policy uncertainties and security issues also weighing on the mind of overseas investors.
“Nigeria may drop further in status as Africa’s biggest producer if the government does not urgently address the situation,” said Wumi Iledare, a professor of economics and former president of the Nigerian Association for Energy Economics (NAEE). “Already the country is no longer the first choice for foreign direct investments.”
According to the Organisation of Petroleum Exporting Countries (OPEC’s) Monthly Oil Market Report (MOMR), citing direct communication with Nigeria, Africa’s largest oil producer was only able to pump 1.238 million bpd in March as against 1.258 million barrels per day it produced per day in February.
Placed against the country’s OPEC quota of 1.718 million barrels per day for March, this was a whopping deficit of 480,000 bpd in in the month under review.
When these daily losses are calculated for the entire 31 days of March, this would be 14.88 million barrels for the whole month and about $1.488 billion at a conservative oil price of $100 per barrel.
While OPEC uses secondary sources to monitor its oil output, it also publishes a table of figures submitted by its member countries, the one it terms “direct communication.”
Nigeria has been unable to reap the benefit of high international oil prices as it has consistently failed to ramp up production for over a year to meet its OPEC quota.
Experts say massive oil theft, outright sabotage, community issues and the inability of the country to restart the oil wells it shut down in the wake of the COVID-19 pandemic in 2020 have been blamed for the development.
“Even the marginal fields awards which would, if they were producing, add to the country’s total output, has largely only made slow progress since the process started, with awardees paying huge interests on their dormant working capital,” Kelvin Atafiri who runs Cavazanni Human Capital Limited, an investment firm exposed to the oil and gas sector said.
