Namcor advises Govt to consider Norway’s oil benefits

A senior National Petroleum Corporation of Namibia (Namcor) executive says Namibia should look at examples of countries like Norway to benchmark maximising benefits from the country’s oil discovery, which is estimated at 54%.

Senior Namcor petroleum economist, Dugald Hammerschlact, during a recent public seminar on oil discovery said Namibia has the capacity to benefit significantly from the oil industry.

“A sovereign wealth fund is a tool for economic diversification. Namibia can look to Norway as an example.

A strong fund could be used to bolster other industries and help strengthen national social safety systems,” he said.

The Institute for Public Policy Research (IPPR) has in recent months warned the government to be aware of who inspires its governance architecture.

“We have to avoid the examples of Nigeria, Equatorial Guinea and Angola at all costs,” the institute said.

Hammerschlact said oil prospecting companies have to pay fees which would be derived directly from revenues, which would guarantee earnings for Namibia.

Namibia’s petroleum agreements entitle the government to receive a share of any successful project once profitable.

This share includes a guaranteed 5% royalty, 35% petroleum income tax, and additional profit taxes ranging between 5% an 12% negotiated based on profit.

Annual licensing fees would bring in N$1 500 per square kilometre.
“The Namibian oil law is the concession type. It grants exclusive rights to the licence holder, rather than being nationally owned.
“The state profits through mechanisms like royalties and corporate taxes,” Namcor executive Mtudeni Ndafyaalako said.

The public seminar was hosted by the Namibian Institute of Public Administration and Management (Nipam) under the theme ‘Navigating Oil Discovery: Lessons from Venezuela for Sustainable Development in Namibia’.

The event was held in collaboration with the embassy of Venezuela, the Ministry of Mines and Energy, and Namcor.

Based on Namcor’s calculations, Shell’s Graff and Venus discoveries have the potential to almost double the Namibian gross domestic product (GDP), which currently stands at N$58,6 billion, by 2043.

“By 2043, the contribution of oil and gas would be 48% of the total GDP,” said Hammerschlacht.

This financial benefit will only become a reality if Namibia can avoid the pitfalls of oil discovery.

These include the neglect of other industries, poor local content policies, and the creation of hostile legal frameworks for investment.

The benefits of oil could be fully reaped with a strong sovereign wealth fund, he said.

Namibia launched the Welwitschia Fund in 2022 after oil discoveries by TotalEnergies and Shell.

The fund was initially capitalised with US$16 million, and will collect some funds from mineral resource royalties and tax revenues.