A study commissioned by US-based EnerGeo Alliance says recent discoveries in Namibia’s Orange Basin present SA with a “unique opportunity” to derisk its own upstream development and add billions of rand to GDP annually.
The study, conducted by FTI Consulting, said SA should seize the opportunities, consider establishing a sovereign wealth fund modelled on Norway’s successful approach and invest in non-resource sectors of the economy.
“The geological continuity between the two countries presents a unique opportunity for SA to derisk its own upstream development, optimise its policy framework and position itself to maximise the economic benefits of the development of the upstream oil and gas industry,” the study notes.
“By analysing Namibia’s trajectory, SA can learn valuable lessons and create a competitive investment environment. The establishment of a regional hub in SA can provide a strategic opportunity for the country to derive economic value from the Namibian boom, regardless of the ultimate size of its own discoveries.”
The Texas-based EnerGeo Alliance is a trade alliance for the energy geoscience industry, with members in more than 50 countries around the world.
The establishment of a regional hub in SA can provide a strategic opportunity for the country to derive economic value from the Namibian boom, regardless of the ultimate size of its own discoveries.
— EnerGeo Alliance
According to the US International Trade Administration, if recent oil finds in Namibia prove to be commercially viable, Namibia could become a top-15 global oil producer by 2035, unlocking an unprecedented revenue windfall for the government.
TotalEnergies, the French major that discovered light oil and gas on the Venus prospect in Namibia in 2022, is said to be in advanced discussions to make a final investment decision in the region of $15bn-$20bn, which will then take five years of development.
TotalEnergies is the operator, with a 40% working interest, alongside QatarEnergy (30%) and Impact Oil and Gas (20%). The remaining 10% is held by state-owned National Petroleum Corporation of Namibia.
Business Day last week reported Standard Bank group CEO Sim Tshabalala as saying that as investment in oil and gas starts to ramp up, growth in Namibia could approach 7% from around 2030.
Oil and gas exploration projects in SA have often been met by legal challenges, with a lack of adequate public consultation often the burning issue.
The Western Cape High Court earlier this year dealt a blow to government efforts to explore for gas offshore from Mossel Bay, setting aside the granting of an environmental authorisation to TotalEnergies for offshore oil and gas exploration activities, remitting the matter back to the department.
The court found the French oil and gas giant’s environmental impact report was flawed, did not properly consider the economic risk of oil spills, failed to consider climate change and lacked proper public participation.
TotalEnergies last year withdrew from gas field projects in SA, saying that the Brulpadda and Luiperd projects could not be “converted into commercial development due to the difficulties encountered in developing and upgrading these gas discoveries on the SA market”.
TotalEnergies discovered the huge Brulpadda and Luiperd gas fields in 2019 and 2020. The Petroleum Agency of SA estimates that the Block 11B/12B project has the potential to create 1,500 direct jobs and 5,000 indirect jobs, and boost the country’s GDP by R22bn.
Boost for SA’s fiscus
The FTI study said SA’s fiscus can benefit greatly if the country pursues a path to exploit its oil and gas.
“The resulting fiscal revenues from royalties, a 35% income tax and the state’s 20% carried interest would generate a substantial new stream of income for the fiscus,” the report said. “While direct employment in the highly specialised upstream sector is limited, the development would trigger a significant multiplier effect, creating jobs across the value chain in logistics, port services, fabrication, construction and professional services.”
Mineral & petroleum resources minister Gwede Mantashe in April laid out an empowerment blueprint for companies looking to explore for gas and oil in SA. The blueprint would include a requirement to contribute to poverty reduction and housing for employees of a rights holder.
Companies will have to provide details of how they will empower the communities they do business with and how they plan to empower black people and black-owned businesses.
SA National Petroleum Company will house the state’s 20% carried interest in petroleum rights, including exploration and production. The company came into being after the merger of existing state-owned petroleum and gas entities, including the Petroleum Oil and Gas Corporation of SA.
President Cyril Ramaphosa a year ago passed the Upstream Petroleum Resources Development Bill, marking the separation of the regulatory oversight of petroleum resources from that of mineral resources, both of which previously fell under the Mineral & Petroleum Resources Development Act.
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