Oil Majors Flock to Namibia as Exploration Reveals Massive Crude Reserves
Namibia is attracting investment left, right and centre thanks to some promising oil discoveries in recent years, accelerating the growth of its burgeoning fossil fuels sector.
In addition to plans for oil and gas exploration, Namibia has also attracted millions in funding from the EU to develop its renewable energy industry, particularly green hydrogen. The rapid rise in investments in Namibia’s energy sector could propel the southwest African country to become a major fossil fuel and renewable energy hub, although, contrary to the hopes of environmentalists, Namibia’s energy minister has said the country will not be rushed to achieve net-zero carbon emissions.
Several oil and gas majors are investing in exploration activities in Namibia following numerous crude discoveries in recent years. TotalEnergies and Shell have made discoveries of an estimated 2.6 billion barrelsof crude and hope to launch the country’s first production operations by the end of the decade. Discoveries have been made in the Orange Basin as well as the Luderitz, Kavango and Walvis basins, which have attracted more oil companies to the southwest African country.
Chevron is expected to commence exploration this year after signing a development deal in the spring for it to take an 80 percent operating working interest in an offshore block in the Walvis Basin. Italy’s oil major Eni and BP’s joint venture Azule Energy, based in Angola, will work with Rhino Resources Namibia to carry out exploration activities in the Orange Basin. The Portuguese energy firm 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 crude or more. In total, 12 oil majors have shown interest in Namibia’s oil assets to date.
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 of the Orange Basin. It announced it would be spending around 30 percent of its $1 billion exploration and appraisal budget in Namibia this year. Total has operated in Namibia since 1964 and plans to finally start producing crude from the Venus 1-X well in Block 2913B, which is estimated to hold 5.2 billion barrels of oil, by around 2029.
Namibia currently has a debt of over 60 percent of its GDP. However, based on recent oil discoveries and the accelerated development of its energy sector, analysts view the country’s economy as stable and expect the debt to stabilise in the medium term. Namibia already has a strong mineral export industry, earning revenues from the export of diamonds and rare earths. However, as greater investment is being designated to explore the country’s crude reserves, Namibia’s energy sector could overtake mining as its main economic driver. Charlie Robertson, the head of macro strategy at FIM Partners, explained, “Oil exports per capita out of Namibia will look like a Gulf state in the 2040s, provided they are competitive globally… which should be a positive for debt to GDP ratios in the country.”
In addition to developing its fossil fuel industry, Namibia has also attracted investment to grow its renewable energy capacity. This September, the European Commission announced it would be providing significant funding to support the development of Namibia’s clean hydrogen and renewable power. The EU has pledged $55.1 million to support Namibia and South Africa’s green hydrogen industries, to invest in the production, transportation, and storage of the clean fuel. The EU and Germany also plan to provide $3 million in funding to Namibia’s Mines and Energy Ministry to “help Namibia to expand its renewable generation capacity and increase access, by creating opportunities for decentralised renewable energy solutions in remote areas,” according to the European Commission’s Energy Minister Kadri Simson. A third deal from Germany and the Netherlands will contribute $1.3 million in grants to the Namibia Green Hydrogen Programme. This is aimed at ensuring “the green hydrogen sector is steered and regulated by an effective support mechanism”, according to Simson. The recent agreements follow the creation of a roadmap on an EU-Namibia partnership on sustainable raw materials value chains and renewable hydrogen last year.
Despite the promise of funding from the EU to help expand Namibia’s renewable energy capacity, Namibia’s Energy Minister Tom Alweendo has criticised calls from the Global North for Namibia to undergo a green transition. Alweendo emphasises the need for oil and gas revenues to support industrialisation and tackle poverty in the southwest African country. This sentiment has been echoed by many other African states, such as Ghana, who see the exploitation of their oil and gas assets as a means of achieving economic development in an unequal world. Nevertheless, greater investment in Namibia’s green energy sector will help the country develop its renewable energy capacity and will allow the African state to diversify its energy mix to boost its energy security in the coming decades.