Having significant hydrocarbon reserves certainly will get energy companies’ attention, but holding the companies’ interest — and convincing them to continue investing billions of dollars in exploration and production activities — requires deliberate, strategic measures on the part of a host country’s leadership. Guyana, according to African Energy Chamber head NJ Ayuk, has achieved this “quite successfully”. And Namibia should follow its lead.
“The African Energy Chamber is pleased to see Namibia’s government working to provide an enabling environment for upstream activity and updating its tax laws. But Namibia must not stop there. To ensure ongoing exploration and production, Namibia’s leaders will need to do everything possible, as quickly as possible, to demonstrate that Namibia is investor friendly,” Ayuk said in a recent piece.
Both Guyana and Namibia have been described as the “hottest frontier oil plays.” Namibia’s Orange Basin is believed to hold up to 3 billion barrels of oil and 5.5 trillion cubic feet of natural gas. The ExxonMobil-operated Stabroek Block holds an estimated 11 billion barrels of oil equivalent of which there’s an estimated 17 trillion cubic feet of natural gas.
But it is Guyana’s attractive fiscal terms that give it the edge. The African Energy Chamber head pointed to the Stability Clause outlined in Guyana’s Stabroek Block deal with Exxon.
“This is not the first time I’ve urged Namibia to begin including fiscal stability clauses in its petroleum agreements, but the point is so important that it bears repeating. Energy exploration is risk-intensive. Failing to provide a fiscal stability clause only adds to investing companies’ exposure and makes them more likely to consider channeling their efforts — and investment dollars — elsewhere,” Ayuk pointed out.
With a stabilization clause the State accepts that the exercise of its legislative and administrative powers will not have the effect of modifying the contractual conditions agreed with the investor to the latter’s detriment.
The fact that Guyana allows for the fast-tracking of its developments is also a point to note for Namibia, Ayuk added.
“I have written extensively this year about how delayed African oil and gas projects in Africa can rob countries of opportunities. Guyana has made a point of avoiding such pitfalls,” Ayuk wrote. ‘
The African Energy Chamber head pointed out further that Guyana also recognises the importance of monetising its natural resources and creating new revenue streams sources before the global energy transition reduces demand for fossil fuels. Simultaneously, Guyana has been updating its regulations and laws to ensure investment thrives.
“This sense of urgency, as much as the oil and gas resources beneath the ground, is why Guyana is making headlines for being an oil and gas hotspot. I am looking forward to watching Namibia achieving similar results and, like Guyana, becoming a role model for other nations with petroleum resources,” Ayuk concluded.