• Market Watch

Namibia gets ready to become new oil hotspot

• 5 Months Ago - 2024-07-23 00:00:00

Off a busy pier in Namibia’s main port of Walvis Bay, the seeds of an economic boom are being planted.
As workers heave fish from boats, or unload cargoes of sulphur and Congolese copper, a massive cylindrical drilling segment is hauled by an extended trailer to a storage area. Between the more typical consignments of raw minerals and imported second-hand vehicles assigned to regional shippers, one lot is filling up with modern oil-exploration equipment.
Once all the drill segments have been collected, they’ll be loaded on a rig and linked together to probe for oil deep beneath the sea floor at the behest of companies including TotalEnergies SE, whose exploration success may be about to transform the fortunes of this country in south-western Africa.

Bustle
The French oil giant, along with London-based Shell plc and Portugal’s Galp Energia SGPS SA, has made big discoveries beneath the Atlantic Ocean about 180 miles off the coast of Namibia. Since the start of 2022, multiple wells drilled have hit oil around 80% of the time – a nearly unprecedented success rate.
That’s causing a bit of a frenzy – from the bustle in Walvis Bay that’s supporting multiple offshore drilling rigs to boardrooms in Texas and California as other oil majors seek a foothold in the hottest new oil province.
“We are preparing the country to be an energy hub for the region, that could potentially double or triple the size of the economy," Maggy Shino, Namibia’s petroleum commissioner, told a conference in the capital Windhoek. “The volume of activity that we are expecting in Namibia going forward in 2025, 2026, 2027 until production, is massive.”

Early days
It’s still early days for Namibia, and none of the discoveries in its waters have yet been declared commercially viable. But TotalEnergies aims to approve its first development at the Venus field later this year, and CEO Patrick Pouyanne has said the African country could one day enjoy a boom like that underway on the other side of the Atlantic in Guyana.
That Latin American country became the world’s fastest-growing economy following major discoveries led by Exxon Mobil Corp. Its production is seen climbing as high as 1.5 million barrels a day by 2029, just 10 years after the advent of its oil industry.
Such a rapid pace of development would be welcome in Namibia, where officials have voiced concerns about whether the oil discoveries could come onstream too late for a world that’s aiming for net zero carbon emissions by mid-century. It would also transform the nation’s economy, potentially doubling GDP by 2040 and boosting the stature of a country that was largely controlled by South Africa for decades before its independence.
Pouyanne envisions that one day as many as seven floating production vessels, each with a capacity of about 180 000 barrels a day, could operate in Namibia’s Orange Basin alone. But first, the country has lots of work to do to get the supporting infrastructure in place.
Namibia will require “a huge infrastructure buildout, all sorts of expansions, to develop these projects and support them through their life cycle,” said Ian Thom, an analyst at Wood Mackenzie Ltd. The consultant is currently reviewing its estimate for the country’s recoverable resources, which had previously been 7 billion barrels of oil equivalent but needs to be updated following Galp’s discoveries.

Getting ready
Namibia is starting to invest in the infrastructure to support drilling. State-owned Namport is drawing up plans to service both the oil industry as well as planned green hydrogen projects, with over US$2.1 billion in upgrades at its ports. Walvis Bay already has an established ship-repair industry that provides explorers with fabrication, welding and assembly services, Namport CEO Andrew Kanime said in an interview.
A vessel operated by Houston-based oil-services company Halliburton Co, called the Stim Star Angola, recently took up one of the floating docks at the port to offer repairs to oil-services equipment. At another berth, the company is setting up a mobile plant making liquid mud – a crucial fluid for drilling operations.
Halliburton plans to employ and train Namibians to work at the facility, which is still awaiting environmental approval. Its US rival Baker Hughes Co. will also build a mud plant.
The smaller port of Lüderitz, located further along the coast and closer to the discoveries, is only a base for TotalEnergies at this point, Kanime said. One day, that harbour is planned to play a larger role in supporting drilling activity for other companies too, he said.
The growing presence of the oil industry is also evident outside of the ports. Workers sporting the blue coveralls of oil-services giant Schlumberger formed a line at a hotel breakfast buffet in the centre of Walvis Bay. A delegation from Galp scheduled a visit with the governor of Erongo Region, Neville Andre, to discuss the opening of a company office in the same town. He said he’s also met with representatives from Chevron Corp.
Andre is looking at local infrastructure that needs to be upgraded, including roads and the airport, as well as training opportunities. “Oil and gas is huge in terms of a sector,” he said. “It’s new to us as a country in terms of operation.”

Global interest
Namibia’s rapidly rising oil potential is starting to draw serious international interest and potentially some multibillion-dollar deals.
Namibia was mentioned even more than Guyana by executives on oil company earnings calls last quarter, according to data compiled by Bloomberg. OPEC secretary-general Haitham Al-Ghais has expressed “excitement” over a potential partnership with the country, which could one day eclipse the production of many of the group’s African members, such as Libya or Algeria.
Galp is looking to sell a portion of its oil discovery, which it estimates could contain as much as 10 billion barrels and be worth about US$20 billion. Exxon Mobil and Shell were among energy giants evaluating bids for the stake, according to people familiar with the matter.
In April, Chevron took an operating interest in the PEL 82 offshore block located north of the other major discoveries. BP Plc and Eni SpA, through their Azule Energy joint venture, acquired a holding one month later in PEL 85, which is closer to the recent oil finds. TotalEnergies also increased its stake this year in the field where it made the Venus discovery.
It’s likely that large companies like these will eventually come to dominate Namibia’s nascent offshore industry, according to Wood Mackenzie’s Thom.
“The risk and the complexity of operating in deep water, the expense of a well, means that you’re looking at the biggest players with the deepest pockets that can drill,” he said.
-Bloomberg