Staff Reporter
The Country Chair for Shell Namibia, Eduardo Rodriguez, has identified attracting investment as the immediate priority for Namibia’s oil and gas sector at this stage, emphasising that the country remains more than a decade away from potential oil production.
“As a nation, our recommendation is that you have to make sure that you have the right terms to provide the certainty needed to keep capital coming in. The more seismic work you do, the more wells you drill, the higher your chances of success become, and that takes strong partnerships, such as the one we have had with Namibia over the past years. Namibia has drilled more than 28 wells in four years. That’s a daunting task, and it doesn’t happen overnight. It happens because of the reputation that the country has built, the agreements, the conversations, and the dialogue that we are having. This encourages investment attractiveness in Namibia. So, in this investment phase, the key priority should be to attract as much investment as possible and to be as competitive as possible,” he said.
Rodriguez made these remarks at the recent Oil and Gas Seminar.
He explained that the road to oil production is a lengthy one, starting with an exploration contract that can take four years. During this period, companies must acquire seismic data, interpret it, identify prospects, and ensure that the studies indicate sufficient potential to justify drilling the first well.
“When you move to the next phase, you usually have to commit to a well. Then you have to convince your investors that you want to drill a US$100 million well – that’s the dry cost – with only a 10% possibility of success. If I come with that proposal, who is willing to jump into that venture? Not many, right? But you have to do it, and that’s how the business works,” Rodriguez said.
For this reason, he emphasised that Namibia must have attractive terms to compensate for the risks involved.
“So, let’s say a company says, ‘Okay, I’m going for it.’ Then you move to the well commitment phase, drill the well, and if everything goes well, you make a discovery – which usually is not the case. One out of 10 wells is successful. That’s why there is a 10% possibility of success. Following a successful discovery, you then have two years, followed by another two years to conduct appraisal activities, further exploration, or interpretation,” Rodriguez explained.
According to Rodriguez, these stages must then be followed by commercial development studies, which could require another two years if the project progresses successfully. This would be followed by the declaration of a petroleum field and a further two years to complete development planning and reach a Final Investment Decision (FID). By this stage, he highlighted, approximately 10 years could have passed.
“Then you have to go and build the infrastructure. You have to secure the FPSO, which is one of the most important units, and that takes around four years. So, if everything goes well, we are talking about 14 years before you can produce the first drop of oil. The life cycles are huge, and that is something that is really important to understand because there are different risk profiles throughout the oil and gas life cycle. Namibia is still in the exploration and appraisal phase. No FID has yet been declared. We are all working very hard towards that objective. That means there is a lot of uncertainty because you don’t know what is going to happen. The risk profile is therefore very high,” Rodriguez said.
Considering this, he emphasised that maintaining Namibia’s competitiveness and attractiveness to investors will be critical as the sector moves forward.
Photo: Bank of Namibia
