Why Namibia Needs an Independent Upstream Oil and Gas Regulator

In the realm of the oil and gas industry, Namibia has recently gained significant attention as a result of the offshore oil and gas discoveries by Total Energies and Shell in 2022.

It has been reported by various publications that Namibia is on its way to becoming a major oil and gas producer, and the country has been advised to put the necessary measures in place to avoid falling victim to the resource curse, which has plagued other countries who failed to effectively manage their petroleum resources.

With so much hype about Namibia’s oil and gas potential, a scrutiny of Namibia’s existing petroleum legal regime is essential to ensure that an effective petroleum legal and regulatory framework is in place.

Having an effective legal and regulatory framework is crucial for the proper development of our petroleum resources.

An effective legal and regulatory framework needs to follow and consider the best practices in the industry and deal with factors such as corruption, health and safety, environmental degradation, the non-sustainable exploration of hydrocarbons, expropriation and to consider the different stakeholders, such as indigenous people, local communities and local governments.

An effective legal and regulatory framework will also ensure that a competent independent authority is established with public powers to provide oversight, regulate the industry and implement government policy.

INDEPENDENT UPSTREAM AGENCIES

An independent upstream oil and gas regulatory agency is responsible for the regulation of the oil and gas sector. Independent regulatory agencies are established as an effective approach to regulation when the legislature delegates powers to public bodies to regulate a certain social or economic area.

Most countries adopt independent upstream oil and gas regulatory agencies to ensure independence and attract high technical expertise. Independent upstream oil and gas regulatory agencies tend to be less politicised than government departments.

An independent regulator will oversee compliance with industry regulations, laws, policies and monitor the performance of industry participants, and take appropriate actions, such as issuing licenses, permits, or penalties.

The role of an independent regulator is crucial in maintaining a fair and level playing field within the regulated industry. It ensures that all participants adhere to the established regulations and compete on equal terms, preventing monopolistic practices or unfair advantages.

THE NEED FOR INDEPENDENCE

The concept of establishing an independent upstream oil and gas regulator is not new in Namibia. The White Paper on Energy Policy of 1998 resolved that the government will ensure that policy making, regulatory oversight, and industry operations are separated.

This was done with a view to ensure that institutions are not both players and referees in the upstream oil and gas sector.

In the same White Paper of 1998, it was acknowledged that the Namibian upstream oil and gas sector was still relatively small and that there may be insufficient human resources to establish entirely separate institutions for each role and, thus recommended that the principle of separation could still be applied to different sections in the same government department.

That’s how the Department of Petroleum Affairs within the Ministry of Mines and Energy assumed the role of regulator.

However, that was 25 years ago, and the petroleum industry in Namibia has evolved with institutions like the Petroleum Training and Education Fund (PetroFund) capacitating a lot of professionals in the industry over the years.

Six years ago, the government, through the National Energy Policy of 2017, and in particular in reliance on policy statements P14 of the Energy Policy, resolved to establish an independent regulator for the upstream oil and gas industry.

Evidently, the government has already taken a position on the establishment of an independent upstream oil and gas regulator. The ball is therefore in the Ministry of Mines and Energy’s court to ensure that it is realised.

The establishment of an independent upstream oil and gas regulator would greatly benefit the country as it would ensure impartiality and transparency in decision-making processes, thereby reducing the potential for conflicts of interest or political interference.

OVERLAPPING POWERS

The regulation of the upstream oil and gas sector in Namibia, as well as the issuing of petroleum licences is done by the Ministry of Mines and Energy’s Directorate of Petroleum Affairs, while it is at the same time being the policy maker.

The ministry oversees the sector and sets policies and guidelines for exploration and production activities. The minister and other relevant government bodies also participate in negotiations of petroleum agreements with international oil companies and establishe the legal and fiscal framework for the industry.

The government and legislature should establish policy, while the regulator regulates the industry and administers regulations arising from policies set by the government. The upstream oil and gas regulator should, therefore, ideally be independent of the policy making process.

While these entities are involved in the regulation and administration of the sector, a distinct and independent regulatory authority with clear separation from the government’s policy making has not been established.

The clear distinction between the roles and functions of the government and the regulator is essential for an effective upstream oil and gas governance framework.

A REGULATOR’S ROLE

For there to be an operational and effective regulator, it is important to design an effective regulatory framework tailored to Namibia’s specific needs and aspirations. Some of the functions and roles that a regulator will undertake include:

Licensing and Permitting: An upstream regulator will oversee the licensing and permitting process for oil and gas exploration and production activities. These will include evaluating applications, setting criteria for qualification and granting licences.

Monitor Petroleum Activities: An upstream regulator will monitor petroleum activities and carry out the necessary inspections and audits related to the activities.

Technical and Safety: An upstream oil and gas regulator will have specialised technical experts in the industry. They will review the technical aspects of exploration and production plans, assess environmental impact assessments, and ensure compliance with safety standards.

Compliance with Laws: An upstream oil and gas regulator will monitor and ensure compliance with national policies, laws and regulations and agreements related to petroleum activities.

Local Content Development: An upstream oil and gas regulator will assess the promotion of local content development. This will be done by setting minimum requirements for local participation, job creation and capacity building. The regulator can facilitate skills transfer, technology transfer, and the development of local businesses.

Environmental Protection: An independent regulator will establish and enforce stringent safety standards, drilling practises and environmental regulations. It can monitor and inspect operations to ensure compliance, thus mitigating potential environmental hazards, as well as minimising environmental impacts.

Issue Guidelines or Notices: An independent regulator may by notice in the Government Gazette issue guidelines or notices to enhance and clarify the understanding, applicability and enforcement of any rule or code pertaining to the upstream oil and gas industry.

LEARNING FROM PRODUCING JURISDICTIONS

The comparison of jurisdictions with independent upstream oil and gas regulators provides valuable insights into the potential benefits of establishing a similar regulatory framework in Namibia.

Brazil serves as an exemplary case, where the creation of the Brazilian National Agency of Petroleum Natural Gas and Biofuels (ANP), as an independent regulatory agency, possesses extensive regulatory powers for the upstream oil and gas sector.

Similarly, the United Kingdom (UK) adopted an independent regulatory approach with the creation of the Oil and Gas Authority (OGA), the rationale behind its establishment being to attract investors through a non-politicised technical body.

The OGA, as an independent body, focuses on operational regulation, licensing and maximising economic recovery of the UK’s oil and gas reserves.

LEARNING FROM AFRICA

Angola, as the second-largest oil producer in Africa, had long relied on its NOC, Sonangol, as the de facto regulator. However, conflicts of interest and governance issues prompted the recognition of the need for an independent regulatory agency.

This led to the establishment of the National Agency for Petroleum Gas and Biofuels (ANPG), which acts as the competent authority for the regulation of the oil and gas industry in Angola.

In Ghana, the creation of the Petroleum Commission as an independent regulatory agency for upstream oil and gas signalled a significant development for the regulation of the country’s oil and gas industry.

The commission possesses regulatory powers, including monitoring petroleum activities, formulating policies, ensuring compliance, and promoting local content.

Ghana’s achievements in good governance and administrative capabilities make it an interesting case to consider.

These comparisons highlight the importance of independent regulatory bodies in overseeing the oil and gas industry. Such a regulator could enhance professionalism, attract investors, ensure efficient regulation and maximise the country’s hydrocarbon resources, while maintaining transparency and good governance practices.

CHANGES ARE NEEDED

The establishment of an independent upstream oil and gas regulator is vital for ensuring effective governance, promoting fair competition, transparency, and safeguarding the interests of all stakeholders involved.

By operating independently, free from political influence, the regulator can make impartial decisions based on technical expertise, ensuring a level playing field for industry participants.

It is, therefore, necessary, in order to have an independent upstream oil and gas regulator, that the current proposed amendments to the Petroleum (Exploration and Production) Act of 1991 should have provisions for the creation of an independent upstream oil and gas regulator.

• Shakwa Nyambe is an energy and natural resources lawyer and the managing partner of SNC Incorporated.