From our selection of 144 Energy Country Profiles, KeyFacts Energy continue a series of snapshot reports with selected information taken from our 'Energy Country Review' database.

NAMIBIA

Namibia (the Republic of Namibia), borders the Atlantic Ocean on its west coast, Zambia and Angola in the north, Botswana in the east, and South Africa in the south and east.

HISTORY

The San, Herero and Nama were overrun by Bantus (Ambos) in the 14th century. The Portuguese arrived in 1485 but did not claim the area. In the 1870s Orlam clans moved into the south, clashing with the Herero. Traders from Germany and Sweden had settled the coast and Germany established a protectorate (German South-West Africa) in 1884, although the British annexed the harbour at Walvis Bay. From 1904 the Germans brutally subjugated local tribes. After German defeat in World War 1 the country was mandated to the UK, through South Africa.

In 1948 South Africa began to apply apartheid, designating areas as homelands and from 1966 The South West Africa People's Organisation (SWAPO) began a guerilla war against them. The UN then assumed responsibility, calling the country Namibia but South Africa maintained its de facto rule. The UN went on to recognise SWAPO and Namibia finally obtained independence from South Africa in 1990 (Walvis Bay in 1994) and Namibia exchanged white minority rule for a stable democracy. Agriculture, tourism and mining now form the basis of its economy.

Namibia is a stable, democratic country, and the Government of the Republic of Namibia is committed to stimulating economic growth and employment through foreign investment. 

FOR over a century, Namibia has had a strong mineral foundation, starting with the discovery of diamonds in 1908. In the years thereafter, it has developed into the fourth largest exporter of non-fuel minerals in Africa today.

This is led by its diamond production, which is the sixth largest in the world by value, uranium production, which is the fifth largest in the world, as well as production of gold, lead, zinc, tin, silver and tungsten.

Adding to the known on-shore and offshore resources to which Namibia's economy is largely pinned, is the possibility of oil reserves. For a number of years there has been interest and activity in prospecting for hydrocarbons, both on and offshore, in Namibian territory. The first prospect wells were drilled in the early 1960s and following a number of dry wells, the Kudu gas fields were discovered in 1974, confirming the presence of hydrocarbons in the geological structures off the Namibian coast. The presence of hydrocarbons further motivated companies to explore coal and oil prospects in the country. However, after 36 coal exploration wells produced negative results and several oil exploration wells were found to be dry, interest in Namibia as an oil frontier waned.

The sedimentary basins offshore Namibia cover an area of approximately 500,000 km², which is comparable in size to the NW Shelf of Australia. By comparison Namibia is underexplored with only 15 exploration wells having been drilled to date resulting in the Kudu gas and condensate discovery in 1974.

The presence of gas at Kudu caused many in the industry to regard the Namibian offshore as being gas-prone and there was not much follow-on exploration activity. Over the last 10 years however, driven by encouraging results from the matching basins on the other side of the Atlantic in Brazil, explorers refocussed on Namibia and during 2012-13 a Brazilian exploration company drilled wells in the Walvis Basin which demonstrated the presence of oil-mature Aptian source rocks. The Wingat-1 well in 2012 encountered thick, mature Aptian oil-prone source rocks and recovered light oil from sandstones within the same interval. 

The following year Murombe-1 also penetrated mature, oil-prone Aptian source rocks but, in addition, encountered a 240m-thick turbidite channel sand of Santonian age with a net-to-gross of 15% and an average porosity of 19%. There were no hydrocarbons present in the well which was thought to be due to lack of up-dip seal, however, it did provide calibration for the seismic signature of potential reservoir facies.

Over the same period in the Orange Basin of southern Namibia, the Kabeljou-1 well was drilled to test a structural high to the north of Kudu. This well encountered oil-prone source rocks in the Cenomanian-Turonian but they were immature. The Kabeljou-1 well did not encounter any potential reservoir.

The following year the Moosehead-1 well tested a structural high outboard of Kabeljou-1. The well encountered oil-prone Aptian and Cenomanian-Turonian source rocks. The deeper Aptian sequence was only marginally mature and the primary reservoir target was a carbonate facies which was a non-reservoir where encountered by the well. In combination with the earlier results at Kudu, where the Aptian source was present but more deeply buried into the gas window, there is now a compelling combination of data points which demonstrate the presence of oil-prone source rocks and provide information about the depth of burial required for maturity. 

Numerous oil seepages have also been reported offshore Namibia with most occurrences clustered around the Walvis Basin in the north and the Orange Basin in the south.

KEY OIL & GAS PLAYERS IN NAMIBIA

Africa Energy: In 2020, Africa Energy announced the successful drilling and testing results of its second consecutive discovery on Block 11B/12B. The discovery on the Luiperd Prospect reconfirms the Paddavissie Fairway as a world-class exploration play with substantial follow-on potential. Due to the success at Luiperd, the joint venture decided to proceed with development studies and engage with authorities on gas commercialization. Africa Energy believe the fundamentals are strong for a gas condensate development on Block 11B/12B as South Africa is a large market looking to transition from coal to natural gas and is currently limited to expensive imports.

Azinam: Since entering the country in 2011, Azinam and Seacrest Capital Group have systematically invested in building an industry leading subsurface dataset. Azinam holds an extensive 2D seismic database which is complemented by six proprietary modern 3D broadband seismic data surveys covering a total of more than 13,000km². This database, in conjunction with a complete legacy well library, provides Azimuth with unmatched technical insights into the basin’s hydrocarbon potential.

BW Energy: In January 2021, BW Kudu, a wholly owned subsidiary of BW Energy and NAMCOR signed a Farm-In and Carry Agreement. The agreement increases BW Kudu’s working interest in the Kudu license offshore Namibia from 56% to 95% in line with previously disclosed intentions. NAMCOR will retain the remaining 5% working interest.

Chariot: Chariot was one of the first oil and gas explorers to secure its licence areas offshore Namibia. As a result of this early entrance, Chariot holds a significant acreage position totalling c.27,000km² and its three licences are located within two geologically distinct basins.

Eco Atlantic: Eco Atlantic holds interests in four offshore petroleum licences totalling approximately 25,000km² with over 2.3bboe of prospective P50 resources in the Walvis and Lüderitz Basins. These four licences, Cooper, Guy, Sharon and Tamar are being developed alongside partners Azinam and NAMCOR. Eco has been granted a drilling permit on its Cooper Block (Operator).

EnerGulf: In June 28, 2013, EnerGulf was granted a 15% interest in Block 1711, under a New Petroleum Agreement (“New PA) to replace the agreement in place since March 31, 2006. 

ExxonMobil: In April 2019, ExxonMobil increased its exploration acreage in Namibia with the addition of approximately 7 million net acres (28,000 square kilometers) following the signing of an agreement with the government of Namibia and the National Petroleum Corporation of Namibia (NAMCOR) for blocks 1710 and 1810, and farm-in agreements with NAMCOR for blocks 1711 and 1811A. 

ExxonMobil also holds a 40 percent interest in the PEL 82 license offshore Namibia, comprising about 2.8 million gross acres (11,500 square kilometers). 

Galp Energia: Galp's position in Namibia consists of two offshore exploration licences, PEL 82 in the Walvis basin and PEL 83 in the Orange basin.

Global Petroleum: The Company's Namibian projects consists of an 85 per cent participating interest in Petroleum Exploration Licence (“PEL”) 0029 covering Blocks 1910B and 2010A and a 78 per cent participating interest in PEL 0094 (acquired in 2018) which covers Block 2011A.

Impact Oil & Gas: Impact’s Namibia assets cover 16,099km² in a location 300km southern offshore Namibia, immediately adjacent to the South Africa maritime boundary, in 3,000-3,900m of water.

Kosmos: In October 2018, Kosmos entered into a strategic exploration alliance with Shell Exploration Company to jointly explore in Southern West Africa. Initially the alliance is focusing on Namibia, where Kosmos has acquired interest in Shell-operated block PEL 39.

LEKOIL: LEKOIL has a long-standing history in Namibia with its holding of an 80 per cent. stake in LEKOIL Namibia, providing an entitlement to 90 per cent. of income distributed by the Subsidiary. LEKOIL Namibia previously owned a 77.5 per cent Participating Interest in two Namibian offshore exploration blocks (Blocks 2514A and 2514B).

Nabirm: Nabirm is an emerging Oil & Gas exploration company focused on exploration of the conjugate margin of the offshore Namibian Continental Shelf. The company's long term strategy is to build a pan-African portfolio of high upside exploration licences combined with near-term material drilling opportunities.

NAMCOR: NAMCOR's main business is to ensure the optimum exploitation of Namibia 's petroleum resources and meaningful Namibian participation in resulting business developments in petroleum related exploration activities. The company also acts as advisor to the Ministry of Mines and Energy and assists it in monitoring the exploration activities of licensees.

Oranto Petroleum: Oranto holds interests in Blocks 2111A & 2011B, offshore Namibia.

The massive Ondjou structure is open to farm-in partners interested in continuing the exploration campaign.

Pancontinental Oil & Gas: Pancontinental has been present in Namibia for the last ten years and during that time has built a solid foundation by working with the Government as well as local joint venture partners to further the exploration of Namibia’s offshore areas. The company hold a 20% W.I. in PEL 37, Walvis Basin and a 75% W.I. in PEL 87, Orange Basin.

Qatar Energy: As part of a farm-out agreement reached in August 2019, Total agreed to transfer to Qatar Petroleum a 30% interest in Block 2913B and retain a 40% interest. Total will also transfer to Qatar Petroleum 28.33% in Block 2912 and retain 37.78%. The deepwater blocks are located in the Orange Basin, offshore Namibia.

In April 2021, Qatar Petroleum entered into an agreement with Shell to become a partner in two exploration blocks offshore the Republic of Namibia.

Under the terms of the agreement, Qatar Petroleum will hold a 45% participating interest in the PEL 39 exploration license pertaining to Block 2913A and Block 2914B, while Shell (the Operator) will hold a 45% interest, and the National Petroleum Corporation of Namibia (NAMCOR) will hold the remaining 10% interest.

The PEL 39 blocks are located offshore Namibia in ultra-deep-water depths of about 2,500 m, covering an area of approximately 12,300 km².​

ReconAfrica: ReconAfrica holds a 90% interest in a petroleum exploration licence in northeast Namibia which covers the entire Kavango sedimentary basin. The exploration licence covers an area of approximately 25,341.33 sq km (6.3 million acres), and based on commercial success, it entitles ReconAfrica to obtain a 25 year production licence. The Kavango Basin offers both large scale conventional and non-conventional play types.

Shell: Shell Namibia Upstream BV holds a 45 percent controlling interest in Petroleum Exploration Licence (PEL) 39.

The PEL 39 blocks are located offshore Namibia in ultra-deep-water depths of about 2,500 m, covering an area of approximately 12,300 km².​

TotalEnergies: In November 2018, The National Petroleum Corporation of Namibia  (NAMCOR) announced the execution of Joint Operating Agreements (JOAs) with Total E&P Namibia BV (Total) and Impact Oil and Gas.

Total has joined Impact and NAMCOR in deep water block 2913B. Block 2913B covers approximately 9000km² in a location 300km southern offshore Namibia and with a water depth of 3000m. NAMCOR holds a 10% carried interest in Block 2913B. The acreage lies along the western toe of the Orange River delta, where deep marine fan sands are contained within large structural traps. Whilst Block 2913B is located 150km west of the Kudu Gas field, recent exploration wells along the outer fringes of the Orange Basin have demonstrated that there exists a rich oil prospective zone running through the block.

In addition, the NAMCOR and Total partnership concluded a Joint Operating Agreement in respect of Block 2912 also located in the Orange Basin. NAMCOR holds a 15% carried interest in the Block 2912 and Total holds the remaining interest.

In August 2019, Total announced that it would transfer to Qatar Petroleum a 30% interest in Block 2913B and a 28.33% interest in Block 2912.

Tower Resources: In November 2018, Tower Resources signed a new Petroleum Agreement (“PA”) with the Government of the Republic of Namibia covering an 80% operated interest in blocks 1910A, 1911 and 1912B, offshore Namibia, together with the National Petroleum Corporation of Namibia (“Namcor”) (10%) and ZM Fourteen Investment CC (10%).

Tullow Oil: Tullow has exploration interests in two operated offshore licence. In September 2018, the Company announced the results of the offshore Cormorant-1 well. The well encountered non-commercial hydrocarbons and has since been plugged and abandoned. In May 2019 Tullow acquired a 56% interest in offshore Block PEL 90 from Calima Energy.

THE MINISTRY OF MINES AND ENERGY

The Ministry of Mines and Energy (MME) is the State’s lead agency in attracting private investment in resources exploration and development through the provision of geoscientific information on minerals and energy resources, and management of an equitable and secure titles systems for the mining, petroleum and geothermal industries.

It also carries prime responsibility for regulating these extractive industries and dangerous goods in the country, including the collection of royalties, and ensuring that safety; health and environmental standards are consistent with the relevant State and Commonwealth legislation, regulations and policies.

Petroleum Affairs Directorate main objectives have been defined to ensure adequate supply of petroleum products to the nation and minimise the negative impact of petroleum resources exploitation on the environment and contribute to the creation of value for society from petroleum activities by:

• Initiating policy and legislation for petroleum exploration, development and production in Namibia.
• Promoting of petroleum activities in the country
• Conducting geological and geophysical researches related to petroleum exploration
• Participating in license negotiation and awards
• Monitoring the activities of oil companies carrying out petroleum exploration , development, production and distribution in the country
• Building national capacity in the petroleum sector
• Creating a conducive investment climate and to ensure that petroleum security of supply is achieved in a country.
• Ensuring that fuel (controlled products) prices are regulated, adjusted and equalized accordingly.

REGULATION

• The state-owned oil company Namcor's main business is to ensure the optimum exploitation of Namibia 's petroleum resources and meaningful Namibian participation in resulting business developments in petroleum related exploration activities.
• The company also acts as advisor to the Ministry of Mines and Energy and assists it in monitoring the exploration activities of licensees.
• Investing companies are not obliged to offer Namcor participation in their prospects

UPSTREAM

• The area of activity is located offshore in the Atlantic Ocean
• Offshore Namibia can be considered under-explored. Only 14 exploration wells have been drilled so far in an area that covers more than 500,000km².
• Five of the wells are located in the Kudu Gas Field which has 1.4 TCF of proven reserves and an upside of 20 TCF. Kudu is the only commercial hydrocarbon discovery in Namibia up to now.
• The results of the other wells were encouraging in that excellent reservoir sequences, source rocks and seal were encountered.

ECONOMIC AND FISCAL TERMS

Namibia offers a streamlined and attractive fiscal package, with some important incentives, for petroleum exploration, development and production operations under the Open Licensing System.

There are three principal components in the fiscal package:

• Royalty;
• Petroleum Income Tax (PIT); and
• Additional Profits Tax (APT)

The economic and fiscal terms have been designed so that almost the entirety of the Government's "Take" will arise from the three principal fiscal elements. In this regard, prospective investors will note that:

• There are no signature, discovery or production bonuses;
• Most items needed for Petroleum Operations can be imported duty free (fuel being an example of an exception);
• Oil companies are exempt from the Non-Resident Shareholders' Tax; and
• There are, generally no mandatory requirements for State (NAMCOR) participation.

As is standard international practice, license application fees, annual license area rental charges and annual training sums (Link to Other Financial Matters below) are payable in addition to the three main fiscal impositions.

THE PRINCIPAL FISCAL ELEMENTS

Royalty

Payable quarterly, Royalty is levied at the rate of 5% (for the existing Kudu license its 12.5%) of the market value of oil and gas produced and saved. In special circumstances, the Minister may defer, remit or refund Royalty due, upon application made by the holder of a production license.

Petroleum Income Tax (PIT)

PIT is levied at the rate of 35% of taxable income. In the computation of taxable income, exploration expenditure and operating expenditure is written off immediately and in full (i.e. 100% depreciation). Development expenditure is depreciated over 3 years (33.33% per annum, straight line), and deducted accordingly. PIT is assessed on a License Area (i.e. contract area) basis. However, as a new incentive, exploration expenditure incurred by a licensee, after the enactment of the Petroleum Laws Amendment Act, 1998, in any License Area in Namibia may be deducted in the computation of that licensee's PIT taxable income from a producing License Area.

Additional Profits Tax (APT)

An incremental three-tiered APT is charged on the after-tax net cash flow from petroleum operations in each License Area separately. Exploration, development and operating expenditures, as well as Royalty and PIT, are all fully deductible in the year they are paid in the computation of the APT net cash flow for the year. APT will only be paid if the petroleum operations in a License Area earn an after-tax real (i.e. inflation-adjusted) rate of return of 15%. The second and third tiers of APT become payable once the profitability level exceeds 20% and 25% respectively.

The first-tier rate of APT is established in the legislation through a formula at 25% (for the existing Kudu license its 33%). However, the incremental second and third tier APT rates are bid-able by, and negotiable with, each prospective investor consortium, and the agreed rates will be set out in the respective Petroleum Agreement.

Other Financial Matters

The application fees are modest, and range from N$3,000 to N$30,000.

Annual License area rental charges (which are deductible in the computation of PIT and APT, and are not indexed to inflation) are as follows:

• N$60 per sq. km. of exploration area held during the first 4 years (and any discretionary extension period);
• N$90 per sq. km. of exploration area held during the next 2 years (and any discretionary extension period);
• N$120 per sq. km. of exploration area held during the subsequent 2 Years (and any discretionary extension period);
• N$150 per sq. km. of exploration area held during any third renewal period;
• N$1,500 per sq. km. of production area held.

Licensees must commit to spend a (bid-able and negotiable) minimum annual amount specifically on the training of Namibians in petroleum and petroleum-related matters. As a result of the Petroleum Laws Amendment Act, 1998, licensees will be required (as from the date when half of the estimated petroleum reserves have been produced) to make annual contributions into decommissioning trust funds. These annual contributions will be deductible in the computation of taxable income for both PIT and APT.

Although not insisting on a Bank Guarantee under the Open Licensing System, Government reserves the right to ask certain licensees to arrange a Bank Guarantee where this is deemed to be in the national interest. Lastly, prospective investors will wish to note that each Petroleum Agreement will contain a comprehensive, modern Accounting Procedure, as well as detailed Valuation provisions based on competitive international fair market pricing principles.

Source: The Ministry of Mines and Energy

GOVERNMENT

Namibia is a semi-presidential democratic republic, whereby the President elected for a 5-year term limited to 2 terms, is head of state and head of government. Legislative power is vested in the Government and a bicameral Parliament.

The government is headed by the prime minister and a cabinet appointed by the president. The 78-member National Assembly is elected for a 5-year term. The 26-member National Council, elected for a 6-year term is advisory. Regional Councils in 13 regions elect 2 representatives to serve on this body.

The Ministry of Mines and Energy (MME) oversees the industry with the Directorate of Petroleum Affairs responsible for petroleum resources. NAMCOR is the NOC with the mandate to explore and produce oil and gas and regulate foreign companies.

Source: KeyFacts Energy, GlobalShift

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