Oil giants flock to Namibia as exploration reveals vast oil reserves

Namibia has been attracting investment left, right and centre thanks to promising oil discoveries in recent years, boosting the growth of its burgeoning fossil fuel sector. In addition to plans for oil and gas exploration, Namibia has also attracted millions of dollars in EU funding to develop its renewable energy sector, particularly green hydrogen. A surge in investment in Namibia’s energy sector could see the southwestern African country become a major hub for fossil fuels and renewable energy, although, contrary to environmentalists’ hopes, Namibia’s energy minister has said the country will not rush to achieve net zero carbon emissions.

Several Major oil and gas industry players invest in exploration activities in Namibia after numerous crude discoveries in recent years. TotalEnergies and Shell have made discoveries with an estimated value 2.6 billion barrelsoil and hope to launch the first production operations in the country by the end of the decade. Discoveries have been made in the Orange Basin, as well as in the Luderitz, Kavango and Walvis Basins, which has attracted more oil companies to the southwest African country.

Chevron is expected start exploring this year after signing a development agreement for an 80 percent operating interest in an offshore block in the Walvis Basin in the spring. Italian oil giant Eni and Angola-based BP Azule Energy joint venture will work with Rhino Resources Namibia to conduct exploration activities in the Orange Basin. Portuguese energy company Galp has already completed the first phase of exploration on its Mopane-1X and Mopane-2X wells and estimates The Mopane field could hold 10 billion barrels of oil or more. In total, 12 Major Oil Companies have so far shown interest in Namibia’s oil deposits.

At the beginning of the year TotalEnergies agreed to purchase an additional 10.5 percent interest in Block 2913B and a 9.39 percent interest in Block 2912 in the Orange Basin. It announced that it would spend about 30 percent of its $1 billion exploration and appraisal budget in Namibia this year. Total has been operating in Namibia since 1964 and plans to eventually start producing oil from the Venus 1-X well in Block 2913B, which is estimated by 2029 it will have 5.2 billion barrels of oil.

Namibia currently has debt exceeding 60 percent of its GDP. However, based on recent oil discoveries and accelerating energy sector development, analysts consider the country’s economy to be stable and expect the debt to stabilize in the medium term. Namibia already has a strong minerals export industry, drawing revenue from exports of diamonds and rare earth elements. However, as greater investment is directed toward exploring the country’s oil reserves, Namibia’s energy sector could overtake mining as the main driver of the economy. Charlie Robertson, head of macro strategy at FIM Partners, explained“Namibia’s per capita oil exports in the 2040s will be on a par with those of a Gulf state, provided they are globally competitive… which should have a positive impact on the country’s debt-to-GDP ratio.”

In addition to developing its fossil fuel industry, Namibia has also attracted investment to expand its renewable energy capacity. In September, the European Commission announced it would provide significant funding to support the development of clean hydrogen and renewable energy in Namibia. The EU has pledged $55.1 million to support the green hydrogen industry in Namibia and South Africa to invest in the production, transport and storage of the clean fuel. The EU and Germany also plan to provide $3 million in funding to Namibia’s Ministry of Mines and Energy to “help Namibia expand its renewable energy capacity and increase access, by creating opportunities for decentralized renewable energy solutions in remote areas.” According to European Commission Energy Minister Kadri Simson. The third agreement from Germany and the Netherlands will contribute $1.3 million in grants to the Namibia Green Hydrogen Programme. This aims to ensure that “the green hydrogen sector is steered and regulated by an effective support mechanism,” according to Simson. The latest agreements follow the creation of an EU-Namibia partnership roadmap on sustainable raw materials value chains and renewable hydrogen last year.

Despite the promise of EU funding to help Namibia expand its renewable energy capacity, Namibian Energy Minister Tom Alweendo criticized the Global North’s calls for Namibia to go green. Alweendo emphasizes the need for oil and gas revenues to support industrialization and combat poverty in the southwestern African country. The same sentiment is shared by many other African countries, such as Ghanawho see exploiting their oil and gas resources as a way to achieve economic development in an unequal world. However, greater investment in Namibia’s green energy sector will help the country develop its renewable energy potential and allow the African country to diversify its energy mix to enhance energy security in the coming decades.

By Felicity Bradstock for Oilprice.com

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