The Energy Sector in Namibia: Projects, Investment & the Drive for 80 % Local Supply

Namibia’s move towards reducing energy import dependency

Who Owns Whom’s report on the energy sector in Namibia highlights the country’s forward-looking economic development policy addressing its dependency on imports, which currently account for between 40 % to 60 % of its energy requirements. It plans to produce 80 % of its own energy by 2030.

Latest policy signal: the International Energy Agency notes a government target “to generate 80 % of electricity domestically by 2028” https://www.iea.org/reports/renewable-energy-opportunities-for-namibia/executive-summary . Achieving this goal would sharply cut electricity imports from South Africa and the Southern African Power Pool and position Namibia as a net exporter within SADC.

Namibia’s GDP per capita and its approach to energy generation

Despite its geographical expanse, Namibia is a small and low-income country. It has a population of only 3 million people, and it ranks 122 out of 189 IMF-measured countries with a GDP/capita of US$4,711, while South Africa is ranked 108 at US$6,517, and Mauritius scores top with a ranking of 76 at US$13,099.

According to the IMF DataMapper (https://www.imf.org/external/datamapper/profile/NAM)   , Namibia’s GDP-per-capita has hovered around US$4,700-US$4,900 since 2022, underlining the need for diversified energy-led growth.

It has offered oil and gas explorers reasonable terms, realising that there is great potential for economic and industrial growth for the country. It is well understood that oil and gas exploration is high risk for any oil major intending to venture into this space, as it involves a huge investment, particularly given the considerable lead time it takes to reach production.

Energy sector hurdles and projects in the pipeline

The challenges are considerable. The pending gas-powered power station feeding from the Kudu offshore field, discovered in 1974, is testimony to the long duration from exploration to production. The BW Energy financial investment decision to implement the 800 MW project has been postponed to 2025, and it will then take another two to three years to reach production and onshore delivery of oil and gas.

Update: Reuters confirms the delay, noting that BW Energy now targets a 2025 final investment decision after revising costs and opting for a floating production unit – https://www.reuters.com/business/energy/namibias-kudu-gas-to-power-project-faces-further-delays-sources-say-2024-04-25/ .

Many other discoveries were made along the Namibian coast in other petroleum exploration blocks, creating highly promising prospects for the oil and gas industry in Namibia, touted to become the fifth largest oil producer in Africa by the middle of the next decade, according to the Who Owns Whom report.

Shell’s Graff-1 (2022) and TotalEnergies’ Venus-1 (2022) finds in the Orange Basin alone could hold >2.5 billion barrels of recoverable resources, propelling Namibia toward an expected 700,000 bbl/d plateau by 2030, according to Reuters – https://www.reuters.com/markets/commodities/opec-woos-namibia-african-nation-prepares-produce-2030-2024-04-15/ 

Below is a map of where all the petroleum exploration licences have been issued to private sector companies alongside Namcor, the government-owned Namibian company.

Most Namibian fields pose challenges as they are 100 km to 300 km offshore, on average, with depth ranges of over 3,000 m, way beyond currently commercially exploited offshore fields. There are also complex rock permeability conditions in some areas. However, advances in technology will continue to be made, as has happened with fracking.

Namibia is taking all this into account and is including technological advances in its preparation for production, and it has commenced investment in the onshore infrastructure in the ports to manage the volumes that will be handled once production is underway.

Contribution of oil and gas exploration projects to the Namibian economy

The oil and gas reserves explored in Namibia have the potential to attract foreign direct investment, with companies like Qatar Energy and the Portuguese energy company Galp already invested. These investments will drive infrastructure development and create high-skilled jobs in engineering, logistics, and trade, contributing to employment among the youth.

The Who Owns Whom report indicates that the country attracted foreign direct investments of US$4.4 bn between 2021 and 2023, of which US$2.0 bn, or 45 %, are linked to the oil and gas industry.

Public data from Namibia’s Investment Promotion and Development Board shows total inflows of N$73 billion (≈US$4.4 bn) in the same period, with N$33 billion directed to oil & gas – https://neweralive.na/fdi-reaches-highest-level-in-decadefuelled-by-n33-billion-oil-gas-injection-2/ 

The report also highlighted that the country’s gross fixed capital formation increased by 50.0 % in real terms to US$2.4 bn in 2023 from US$1.6 bn in 2022, largely due to a 237.9 % increase in mineral exploration (which includes petroleum exploration) to US$1.2 bn in 2023 from US$355.1 m in 2022.

Very soon, Namibia, which is currently a net oil and gas importer and consumer of 0.02 Mb/day, will become a producer of 0.7 Mb/d, more than South Africa’s daily consumption of about 0.55 Mb/d.

The business-friendly policies in Namibia have enabled the private sector to participate meaningfully in the economy, creating onshore business opportunities in the SME space.

Energy mix in Namibia

The Namibian energy mix strategy is quite diverse, being made up of solar, gas, wind, biomass, and green hydrogen, with independent power producers’ participation growing and estimated to contribute about 11 % of the national energy mix according to the news in Namibian Mining & Energy. A recent Electricity Control Board update cites 23 IPPs investing N$5 billion to date – https://x.com/miningandenergy/status/1808886016167510517 

Oil and gas production is not supported by international energy transformation policies but will remain an essential source of energy and an input to many chemical, pharmaceutical, and other industries.

Complementing hydrocarbons, the flagship Hyphen Green Hydrogen Project aims to export up to 300,000 t of green hydrogen annually from Namibia’s ||Kharas Region – https://hyphenafrica.com/   – positioning the country as a future renewable-fuel hub.

The different energy projects underway in Namibia put the country well on its way to achieving the 80 % local production and reducing its energy dependency.