Namibia is gearing up to invest a significant portion of potential revenue from a substantial oil discovery into a sovereign wealth fund, Finance Minister Ipumbu Shiimi has said in an interview with a New York news service.
The country is awaiting confirmation on the commercial viability of the oil find, with expectations of a final investment decision (FID) by the end of the year.
The recent oil discoveries by Total Energies and Shell off Namibia's southern coast have prompted the launch of a sovereign wealth fund, marking a strategic move by the government to manage and allocate the anticipated oil revenue effectively.
This initiative comes amidst concerns raised by environmental activists regarding the potential negative impacts of oil exploration on the country's environment and economy.
Speaking to Bloomberg, Ipumbu emphasised the need to assess the commercial feasibility of the oil discovery before proceeding with major investment decisions.
The government aims to ensure that any investments made are sustainable and beneficial for the country in the long term.
This cautious approach reflects Namibia's commitment to responsible resource management and economic development.
As the nation awaits further developments on the oil discovery, the establishment of a sovereign wealth fund signals Namibia's proactive stance in securing its economic future.
The fund is poised to play a crucial role in safeguarding and maximising the benefits derived from the oil reserves, with a focus on long-term financial stability and growth for the country.
The fund, widely viewed by energy sector executives as a strategic decision to properly channel and manage oil revenue into a sovereign wealth facility underscores Namibia's commitment to prudent financial management and sustainable development.
The upcoming months are crucial as the country awaits the outcome of assessments on the commercial viability of the oil discovery, paving the way for informed investment decisions that will shape Namibia's economic landscape in the years to come.
Speaking to Freight News during a visit to the Port of Walvis Bay last year, Anton Pretorius, the Group CEO of Logistics Support Services, said the work that Shell and Total are busy with along the coast of Namibia has all the signs of proceeding from the initial exploration and appraisal phase to progressing to FID.
It would signal the start of the long-awaited development phase, he said.
Although the technical and financial feasibility studies are a drawn-out process, the development phase could add another five years to that timeline before production starts to flow, Pretorius said.
He added that the FID development, coupled with the eventual production, could transform Namibia’s GDP.
“Considering only Total for the moment, bear in mind that 50% of their entire global exploration budget is currently going to Namibia, and they wouldn’t be doing that if they didn’t have high expectations for the discovery.”
Putting a finer point to his conviction that Namibia is on the eve of a game-changing leap into exploration progress for its nascent energy sector, Pretorius said: “Yes, oil and gas development has a fairly long timeline, but when it finally comes on stream, it has the potential to grow Namibia’s GDP by up to 30%.”
If energy development takes off in the manner it is predicted to; its fiscal potential could equal the combined GDP contribution of the country’s existing economy, driven mainly by metallurgical and agricultural activity.
