Namibia has a fledgling upstream industry with probably more gas than oil potential. It has, however, a very well established downstream oil-marketing infrastructure. Historically the country has always been closely tied to South Africa and the downstream industry was for many years treated as an extension of the South African system with industry data still coordinated by Caltex South Africa.
Namibia is underexplored with seven onshore and eleven offshore wells. The only significant discovery to date has been the Kudu gas field operated by Shell.
The legal framework governing the exploration for, development and production of petroleum in Namibia is set out in the Petroleum (Exploration and Production) Act, 1991 (the “Petroleum Act”), the Petroleum (Taxation) Act, 1991 (both as amended principally by the Petroleum Laws Amendment Act, 1998) and the Model Petroleum Agreement 1998.
There have been three licensing rounds in 1991, 1994 and 1998. Since the disappointing results of the third licensing round, an Open Licensing System has been introduced.
The downstream sector is well established and closely linked to that of South Africa. Most international companies are represented. Namibia has no refinery and is dependent on imports from South Africa and Cote d’Ivoire. Namibia is a member of the South African Customs Union. The Petroleum Products and Energy Act, 1990 controls activities in the downstream sector.
The state-owned National Petroleum Corporation of Namibia (NAMCOR) is the national oil company. This functions as a part of the Ministry and works with it to promote the country’s acreage. It also acts as an advisor on national petroleum policy and has the capacity to act on behalf of the state as its commercial arm.
The Ministry of Mines and Energy (MME) regulates the Namibian oil industry.
Namibia appears to have a greater potential for gas than for oil. Offshore exploration started in 1968 and resulted in the discovery of the Kudu gas field by Chevron in 1973. For political reasons, further exploration and appraisal work was halted until 1987-1988 when the forerunner of the current state oil company, National Petroleum Corporation of Namibia (NAMCOR), drilled a series of appraisal wells.
Further exploration did not resume again until after Namibia achieved independence. The first bidding round was opened in September 1991 and attracted exploration to the northern area of the offshore and to two blocks in the extreme south. In October 1994, the Namibian government opened its second licensing round for hydrocarbon permits. The government of Namibia altered the terms of its model agreement to make it more attractive to international companies and undertook to be flexible in any negotiations. In 1996 Energy Africa acquired Block 7, Amoco Block 18 and Mobil Block 20.
Subsequently all licences, with the exception of block 2814A, were relinquished. Namibia’s third petroleum licensing opened in October 1998. Unfortunately, no bids were received and Namibia converted to an Open Bidding System. Following this conversion, in June 2000, Block 1711 was awarded to Vanco Energy who immediately started a 3-D seismic survey of the basin.
Namcor and Sonangol of Angola plan to undertake a joint study of the Namibe Basin.
The downstream industry in Namibia is well established and closely linked with that of South Africa. In 1997, consumption was of the order of 400,000 metric tons. Namibia imports all of its petroleum product, either from Côte d’Ivoire or South Africa. There are five main companies that distribute and market fuel products in Namibia, BP, Caltex, Total, Engen and Shell. Since 1999, Mobil Oil SA has set up a lubricants distributorship with head offices in Walvis Bay. Pricing in Namibia is strongly linked to the South African market as Namibia is a member of the South African Customs Union.
The Petroleum Products and Energy Act, 1990 controls activities in the downstream sector.