Energy: Oil & Gas 2022 Comparisons

According to Article 100 of the Constitution of the Republic of Namibia 1990, all natural resources on, in or under any land in Namibia are vested in the state, unless they are otherwise lawfully owned. This includes all natural oil and natural gas, which under Namibian legislation are generally referred to as petroleum.

The upstream petroleum industry in Namibia is primarily regulated by the Petroleum (Exploration and Production) Act 1991 (Act 2 of 1991) – the "Petroleum Act". The Petroleum Act provides that all rights in respect of petroleum are vested in the state, notwithstanding any right regarding the ownership of the land where the petroleum is found.

As a result, ownership of petroleum resources in situ, as well as the right to exploit these resources, vests in the state. This effectively amends the common law position in Namibia, according to which, the owner of land is considered to be the owner of everything above and below the land. The minister, acting on behalf of the state, may however grant the rights to exploit these resources to applicants in accordance with the terms of the Petroleum Act.

There are no regulations pertaining to the ownership of petroleum commodities traded at downstream level, in relation to which, the common law position of ownership applies.

The Petroleum Act is administered by the Minister of Mines and Energy (the "Minister"). The Minister must appoint a commissioner of petroleum affairs (the "Petroleum Commissioner") and a chief inspector of petroleum affairs. These two officers exercise or perform the powers, duties and functions conferred or imposed upon them by or under the provisions of the Petroleum Act, as well as such other functions as may be imposed upon them by the Minister. The Petroleum Commissioner and chief inspector are assisted by such other officers as may be designated by the Permanent Secretary of Mines and Energy for this purpose.

The Petroleum Ancillary Rights Commission is also established under the Petroleum Act. This commission principally deals with disputes between licence-holders and landowners.

The National Petroleum Corporation of Namibia (PTY) Ltd (Namcor) is a private company duly incorporated under the company laws of Namibia, and is wholly owned by the government of the Republic of Namibia.

Namcor has no regulatory authority nor statutory right to participate in petroleum development. However, at the request of the Minister and on its own behalf or that of the state, it may:

• carry out reconnaissance operations, exploration operations and production operations, whether on its own or together with any other person or entity; and
• carry out or take part in any process of refining, disposing of or dealing in petroleum or any of its by-products.

Namcor may engage in this activity in order to advise or otherwise assist the Minister in relation to the Petroleum Agreement (see 1.4 Principal Petroleum Law(s) and Regulations) or any negotiations relating to it, or in relation to the discovery of petroleum or the development of petroleum resources, with the goal of assisting the Petroleum Commissioner at their request and in the exercise of their powers, duties and functions under the Petroleum Act.

The Petroleum Act

As stated in 1.1 System of Petroleum Ownership, the upstream petroleum industry in Namibia is primarily regulated by the Petroleum Act, which provides for the reconnaissance, exploration, production and disposal of petroleum, as well as control over it. No person may carry on any operations in respect of petroleum without the necessary licence issued by the Ministry of Mines and Energy (MME). The Act also provides for the payment of petroleum royalties.

The Taxation Act

Aside from the Petroleum Act, the Petroleum (Taxation) Act 1991 (Act 3 of 1991) – the "Taxation Act" – is also applicable to upstream petroleum activities. The Taxation Act provides for the payment of petroleum income tax and additional profit tax.

Model Form Petroleum Agreements

Furthermore, the Petroleum Act requires an applicant for a petroleum licence to enter into a Model Form Petroleum Agreement with the state. The agreement must be entered into before an exploration or production licence is issued to an applicant. The content of the Model Form Petroleum Agreement is prescribed by the Act. The Model Form Petroleum Agreement was published in 1998 and updated in 2007.

Other Legislation

Other legislation that makes up the framework within which petroleum exploitation takes place includes environmental legislation, such as the Water Act 54 of 1956, the Atmospheric Pollution Prevention Ordinance 11 of 1976, the Prevention and Combating of Pollution of the Sea by Oil Act 6 of 1981, and the Environmental Management Act 7 of 2007.

Expropriation

There are no provisions under the Petroleum Act for the expropriation of an interest in a licence. Licences can, however, be cancelled under certain conditions.

The principal petroleum law and regulations for downstream operations are more fully discussed in 3.3 Issuing Midstream/Downstream Licences.

Under the Petroleum Act, the Petroleum Commissioner may grant three different types of licence on application by a company. This application procedure is explained in 2.2 Issuing Upstream Licences/Obtaining Petroleum Rights.

Reconnaissance Licence

A reconnaissance licence entitles its holder to carry on reconnaissance operations in the block or blocks specified in the licence. "Reconnaissance operations" are any operations carried out for or in connection with the search for petroleum through geological, geophysical and photo-geological surveys, and they include remote-sensing techniques.

Application

Application for a reconnaissance licence or the renewal of a reconnaissance licence must be made in the prescribed manner.

Duration

A reconnaissance licence is issued for a maximum period of two years and may be renewed for further periods, not exceeding two years at a time. It may, however, only be renewed twice.

Exploration Licence

An exploration licence authorises its holder to carry on exclusive exploration operations within the block or blocks to which the licence relates, subject to the terms and conditions specified in the licence. "Exploration operations" are any operations carried out for or in connection with the exploration for petroleum. These include geological, geophysical, geochemical, palaeontological, aerial, magnetic, gravity or seismic surveys; the use of such surveys and drilling for appraisal purposes; and the study of the feasibility of any production operations or development operations to be carried out in the licence area, or of the environmental impact of these operations.

Application

An application for an exploration licence may not be granted in relation to any block or blocks in respect of which, at the time when the application is made, any licence other than a reconnaissance licence has been issued to any other person. The exploration licence must state the date on which it is issued, the particulars of the block or blocks to which it relates, and the terms and conditions other than the standard conditions contained in the Petroleum Act subject to which the licence is issued.

Duration

An exploration licence is valid for an initial maximum period of four years. The Minister may, upon application and with good cause, extend this period to an initial maximum of five years. A licence may be renewed for two further periods of two years each, but may not be renewed on more than two occasions, except as explained here. The Minister may, upon application and with good cause, extend these periods to a maximum of three years each. A third renewal is possible if the Minister deems it to be in the interest of the development of petroleum in Namibia. This third renewal may not be for a period longer than two years, although the Minister may, upon application and with good cause, extend this period to a maximum of three years. The holder of an exploration licence may, on renewal, be obliged to relinquish a certain portion of the exploration area.

Invitation to apply

Subject to the provisions of the Petroleum Act, the Minister may, if they deem it necessary or expedient in the public interest or that of the petroleum industry, invite applications for the granting of an exploration licence in respect of any block or blocks by notice in the Government Gazette. This notice may specify a period within which applications may be made and the terms and conditions subject to which any such application may be made. At present, an open bidding system exists and as such, investors are free to apply for an exploration licence to the extent blocks are available.

Production Licence

A production licence authorises its holder to carry on exclusive production operations in the block or blocks to which the licence relates, to sell or otherwise dispose of petroleum recovered within the block or blocks and to carry on other operations and works in, or in connection with, the block or blocks that may be necessary for, or in connection with, the operations and selling or disposal. "Production operations" are any operations carried out for, or in connection with, the production of petroleum. The production licence must state the date on which it is issued, the particulars of the block or blocks to which the licence relates, and the terms and conditions (other than the standard conditions contained in the Petroleum Act) subject to which the licence is issued.

Application

The Petroleum Act prescribes the content of an application for a production licence and an application for the renewal of a production licence, as well as the powers of the Minister in respect of the granting or refusal of production licences.

Any part of an exploration area in respect of which a production licence is issued ceases to be part of the original exploration area. See 2.10 Legal or Regulatory Restrictions on Production Rates for the official response to under-production.

Duration

A production licence is valid for a period not exceeding 25 years, to be determined by the Minister at the time when the licence is granted. It may be renewed for a further period, not exceeding ten years, to be determined by the Minister at the time of renewal of the licence. The renewal period runs from the date on which the licence would have expired if an application for renewal had not been made or from the date on which the application for renewal is granted, whichever is later. A production licence may not be renewed on more than one occasion. The maximum duration of a production licence is therefore 35 years. A production licence cannot expire in the period during which an application for its renewal is being considered, until the application is refused, withdrawn or lapses, whichever occurs first.

COVID-19 Extensions

In light of the unprecedented global impact of the COVID-19 pandemic, the provisions of Clause 27 of the Model Form Petroleum Agreement read with Section 20 of the Petroleum Act empower the Minister, on application made to the Minister by a licence-holder who has been prevented from exercising any rights under their licence for any period as a result of an act of God, to extend by notice in writing on such conditions as the Minister may determine, the period for which the licence in question has been issued, by such period as may be determined by the Minister. The Minister must, however, give due regard to the provisions of this Act which relate to the period after which the licence in question expires.

The procedure for acquiring reconnaissance, exploration or production licences is by way of application under an open bidding system. In the case of a company, this application must contain:

• the name of the company and particulars of its incorporation and registration;
• the names and nationalities of its directors;
• the share capital of the company and the name of any person who is the beneficial owner of more than 5% of the shares issued by the company;
• the block or blocks to which the application relates;
• the minimum operations and expenditure proposed to be carried out or expended in respect of the block or blocks to which the application relates;
• the programme of these operations;
• the expenditure in respect of these operations;
• the period within which the operations will be carried out and the expenditure will be made;
• an estimate of the effect the proposed reconnaissance operations may have on the environment; and
• the period for which the licence is required.

The applicant must demonstrate the technical and financial capacity to perform the minimum work commitments proposed and to cover the minimum expenditure to be incurred.

There have been no significant changes in the regulatory approach with respect to the issuing of licences.

Royalties

Royalties are charged according to the terms of the Petroleum Act. They are payable quarterly on or before the last day of the month following each quarter. The rate at which royalties are charged depends on the licensing round during which the licence was issued. The royalty on licences issued during the first and second licensing rounds is charged at a rate of 12.5% of the market value (determined according to the terms and conditions of the licence) of the petroleum produced and saved in the production area during each quarter. Royalties on licences issued during the third and fourth licensing rounds are charged at a rate of 5% on the market value (determined according to the terms and conditions of the licence) of the petroleum produced and saved in the production area during each quarter. The market value is determined based on the petroleum produced and saved.

The Petroleum Taxation Act

The tax regime for petroleum exploration and production activities is regulated under the Petroleum Taxation Act 3 of 1991 (the "Petroleum Taxation Act") as amended by the Petroleum Laws Amendment Act of 1998. The aforesaid Act provides for the levy and collection of petroleum income tax and an additional profit tax.

The rate of petroleum income tax is 35% of the taxable income received or accrued by, or in favour of, a person from a licensed area. Each licensed area is assessed separately and losses in one area cannot be offset against profits in another.

The Petroleum Taxation Act further provides for the levying of additional profit tax in respect of the first, second and third accumulated net cash position determined with respect to every tax year.

Annual surface charges are also payable by holders of exploration and production licences, calculated on the number of square kilometres included in the block to which the licence relates.

Other Applicable Tax Laws

Other tax laws that apply to the oil industry are as follows.

• The Income Tax Act 24 of 1981, as amended, which provides for withholding tax of 10% imposed on all management, consulting, technical, administrative and entertainment services paid by a resident to a non-resident, subject to the provisions of any double-taxation agreements. Service fees payable to foreign directors and foreign entertainment fees attract a withholding tax of 25%.
• The Value Added Tax Act 10 of 2000, which currently rates VAT at 15%.
• The Stamp Duties Act 15 of 1993, which provides for the collection of stamp duties on instruments at rates determined in the schedule to the Act.
• The Export Levy Act 2 of 2016 which imposes an export levy of 1.5% on unrefined crude oil of all types.

The Ministry of Finance (through the permanent secretary) is the government body that exercises tax authority.

See 2.3 Typical Fiscal Terms under Upstream Licences/Leases.

Namcor has no special rights in connection with upstream licences. In practice, however, Namcor typically receives a 10% participating interest in the award of an exploration licence. Namcor’s participating interests are typically subject to such terms as may be agreed between Namcor and a co-licence-holder(s) in terms of a joint operating agreement.

There are no statutory local content requirements for upstream operations by private investors. The MME has, however, developed a practice according to which foreign investor applicants for exploration licences may be required to make 5% participating interest in any licence available to be acquired by Namibian-owned companies (in addition to Namcor's 10% participating interest allocation).

Furthermore, it is a standard condition of a petroleum licence that the person to whom the licence has been issued will:

• when selecting employees, give preference to Namibian citizens who have appropriate qualifications for the purposes of the operations to be carried out in terms of the licence;
• carry out training programmes in order to encourage and promote the development of Namibian citizens in their employment;
• having due regard to the need to ensure technical and economic efficiency, make use of products, equipment and services which are available in Namibia;
• co-operate with other persons involved in the petroleum industry in order to enable Namibian citizens to develop the skills and technology required to render services in the interest of the industry in Namibia; and
• immediately report the discovery of any mineral in their exploration area to the Minister.

When a discovery is made in an exploration area, the holder of the exploration licence must inform the Petroleum Commissioner forthwith by notice in writing. Within a period of 60 days of this notice, the holder of the licence must furnish the Petroleum Commissioner, in writing, with particulars relating to the block or blocks in which the discovery was made, the nature of the discovery and any other particulars that the Petroleum Commissioner may require. The holder of an exploration licence must immediately arrange for tests to be done in connection with the discovery in order to determine the commercial interest of the discovery, and, within a period of 60 days of these tests being completed, furnish the Petroleum Commissioner with a report containing the evaluated results of the tests and an evaluation of the potential commercial interest of the discovery.

If it appears from the report that the discovery may be of commercial interest, the holder of the licence in question must take all reasonable steps in order to appraise the discovery and determine the quantity of petroleum to which the discovery relates, in so far as it occurs within the exploration area, and furnish the Petroleum Commissioner with a report containing the particulars of this appraisal and a determination after the appraisal has been completed.

An application for a production licence must, among other things, contain a development plan, with a proposed programme of production operations and of the processing of the petroleum in question, which must include:

• the date on which it is estimated the applicant will commence the production of the petroleum in question;
• an estimate of the capacity of such production and the extent of the operations to be carried out;
• an estimate of the overall recovery of such petroleum and of any by-products recovered in processing such petroleum;
• the nature of such petroleum and by-products;
• the arrangements made for the sale of such petroleum and by-products;
• the manner in which the applicant intends to prevent pollution, to deal with waste, to safeguard natural resources and to minimise the effect of such operations on land adjoining the production area;
• separate decommissioning plans in respect of the production area and any area outside such production area where activities in connection with the production operations are being carried out, setting out to the satisfaction of the Minister (acting in consultation with the ministers responsible for the environment, fisheries and finance) the measures proposed to be taken after cessation of such production operations to remove or otherwise deal with all installations, equipment, pipelines and other facilities, whether onshore or offshore, erected or used for the purposes of such operations, and to rehabilitate land disturbed by way of such operations, which plans must include –
1. the estimated date when such decommissioning would occur;
2. the extent of such decommissioning;
3. the manner in which such decommissioning would take place;
4. the estimated cost of such decommissioning; and
5. such other measures or information as the Minister may determine; and
• a statement setting out any significant effect that the carrying out of such production operations is likely to have on the environment and the manner in which the applicant intends to control or eliminate such effect.

See 2.1 Forms of Allowed Private Investment in Upstream Interests.

In addition, there is a term under the Model Form Petroleum Agreement that the Minister may, at their discretion, require holders of production licences to sell crude oil in Namibia in order to satisfy Namibia’s domestic supply market requirement. This requirement will be fulfilled on a pro rata basis with other producers in Namibia, according to the quantity of crude oil produced by each producer.

A licence-holder must keep proper record of the abandonment of wells in connection with reconnaissance, exploration or production operations.

The cancellation of a licence does not affect any obligation or liability incurred in relation to anything done under, or by virtue of, the terms and conditions of the licence.

In cases where a licence is issued to more than one company, the Model Form Petroleum Agreement provides that all of the licence's terms and obligations will apply to each company, jointly and severally.

Licence-holders must effect and, at all times during the term of this petroleum agreement, obtain and maintain insurance for, and in relation to, petroleum operations. This insurance must cover:

• loss or damage to any or all of the assets being used in connection with the petroleum operations;
• loss or damage, for which the licence-holders may be liable, caused by pollution in the course of, or as a result of, the petroleum operations;
• loss of property or damage suffered, or bodily injury suffered, by any third party in the course of, or as a result of, petroleum operations for which they may be liable;
• any claim for which the government may be liable relating to the loss of property or damage suffered, or bodily injury suffered, by any third party in the course of, or as a result of, petroleum operations, in so far as they are liable to indemnify the government;
• the cost of removing wrecks and cleaning-up operations pursuant to an accident in the course of, or as a result of, the petroleum operations; and
• the licence-holder's liability to employees engaged in its petroleum operations, and any other risk of whatever nature as is customary to insure against in the international petroleum industry in accordance with good oilfield practices.

No person may transfer a petroleum licence or grant, cede or assign any interest in a petroleum licence to any other person without the written approval of the Minister. The same applies if a person wishes to become a joint holder of a petroleum licence. A licence may only be transferred, or interest in a licence granted, ceded or assigned, to a company, and only another company may become a joint holder of a petroleum licence.

The renewal, transfer, cession or assignment of interest in a licence is to be made by way of application to the Petroleum Commissioner, and the Minister may refuse or grant a licence on whatever terms and conditions as they may determine. Such application must contain particulars of an assignee’s financial and technical capacity to fulfil the work obligations under the petroleum agreement. The granting, ceding or assignment of an interest in a licence does not affect the obligation or liability of the holder of a licence imposed in terms of the particular licence or any provisions of the Petroleum Act.

It takes approximately one to two months for such an application to be considered. The application fees for the transfer of an exploration or production licence amount to NAD30,000 and there are no statutory pre-emptive rights reserved for the state.

A change of control of a company does not require the approval of the Minister. According to the terms of the Petroleum Act, no consent is required for a change of operator. However, the Model Form Petroleum Agreement typically provides that the Petroleum Commissioner should give consent for a change of operator.

If petroleum is not recovered in a production area within which the Minister is satisfied that petroleum is recoverable, or if petroleum is recovered at a rate which, in the opinion of the Minister and having regard to the capacity of the petroleum reservoir in question, the Minister feels not to be in the public interest, then from time to time the Minister may, by notice in writing addressed and delivered to the holder of the production licence concerned, direct the holder to take (with due regard for good oilfield practices) such steps as may be necessary and practicable to recover petroleum in the given area or to increase or reduce the rate at which the petroleum is recovered. This rate should not exceed the capacity of the production facilities of the holder of the licence, as the Minister may specify in the notice. Any holder of a production licence who contravenes or fails to comply with such a notice is guilty of an offence and, on conviction, is liable to a fine not exceeding NAD100,000.

In addition, the Minister may (with due regard for good oilfield practices) by notice in writing addressed and delivered to the holder of a licence, give directions to the holder in relation to the rates or the determination of rates at which petroleum and water may be recovered from any well drilled for the purposes of, or in connection with, reconnaissance operations, exploration operations or production operations, or from any petroleum reservoir. If the licence-holder fails to comply with these directions to the satisfaction of the Minister, within the period specified in the notice or a further period that the Minister may with good cause allow in writing, then the Minister may cause such steps to be taken as may be necessary for compliance with the directions, and may recover from the licence-holder in a competent court the costs incurred in connection with the steps taken. Any holder of a licence who contravenes or fails to comply with a notice is guilty of an offence and, on conviction, may be liable to a fine not exceeding NAD20,000 or to imprisonment for a period not exceeding five years, or to both a fine and imprisonment.

See 3.3 Issuing Midstream/Downstream Licences.

No national monopoly exists in Namibia. It is, however, worth mentioning that in the past, Namcor had a statutory mandate which has since been revoked, to exclusively source 50% of Namibia’s annual fuel requirements. There is a possibility that this mandate may be restored.

Downstream petroleum trading is regulated under the Petroleum Products Regulations (the "Regulations"), passed under the Petroleum Products and Energy Act 13 of 1990 (the "Petroleum Products Act"). There is no bidding system.

The following licences and certificates may, in accordance with the Regulations, be granted and issued on application to the Minister:

• a retail licence;
• a wholesale licence; and
• a consumer installation certificate.

Retail Licence

An application for a retail licence must be accompanied by:

• a certified copy of the applicant’s identity document and, in the case of a non-Namibian citizen, a permanent residence permit or an employment permit and proof of residence in Namibia, or proof of domicile in Namibia, as the case may be;
• a certified copy of the applicant's registration documents, if the applicant is a body corporate;
• a certified copy of an environmental impact assessment, with its outcome, if such a study has been conducted;
• if applicable, a written confirmation by the supplying wholesaler that it agrees to supply fuel to the applicant with a list of all the buildings, structures and plants, and any other item or assistance that the wholesaler agrees to supply to the applicant in the event of a successful application;
• a signed declaration by the applicant that there is sufficient capital available for the operation of a retail outlet, and a description of the amount and nature of such capital and particulars regarding the terms under which the capital is held or invested;
• a final design or construction drawings of all buildings, roadworks, structures and the plant to be erected on the proposed premises, including the location of the proposed premises, or if not available, preliminary sketches or a general layout plan of the premises; and
• in the case of an applicant being a wholesaler, written confirmation of whether the applicant intends to operate the proposed retail outlet itself or whether the applicant intends to enter into an agreement with another person, according to which, the other person will operate the retail outlet.

Wholesale Licence

An application for a wholesale licence must be accompanied by:

• a certified copy of the applicant’s identity document and, in the case of a non-Namibian citizen, permanent residence permit or employment permit and proof of residence in Namibia, or proof of domicile in Namibia, as the case may be;
• a certified copy of its registration documents, if the applicant is a body corporate;
• a list of all retail outlets and others that, at the time of application, it intends to supply with fuel;
• a list of the ports of entry or exit where it intends to import or export fuel, as the case may be;
• a list of all the storage facilities intended to be used, including shared storage facilities, with specific reference to:
1. the location of the storage facilities;
2. the capacity of the storage facilities;
3. the ownership of the storage facilities (including the ownership of the land on which the storage facilities are situated, if different) and, in the case of shared ownership, the basis of sharing; and
4. the names of other wholesalers sharing the same storage facilities;
• in the case of storage facilities to be erected, the final design or construction drawings of buildings, roadworks, structures and the plant to be erected, including the location, or if not available, preliminary sketches or a general layout plan thereof, and in the case of existing storage facilities, the as-built or record drawings of the buildings, roadworks, structures and the plant, including the location; and
• if an environmental impact assessment has been conducted, a certified copy of the document setting out the outcome of such study.

Consumer Installation Certificate

An application for a consumer installation certificate must be accompanied by:

• a certified copy of the applicant’s identity document and, in the case of a non-Namibian citizen, permanent residence permit or employment permit and proof of residence in Namibia, or proof of domicile in Namibia, as the case may be;
• a certified copy of the applicant's registration documents, if the applicant is a body corporate;
• proof that the applicant operates a commercial or industrial undertaking or mine, or is a bona fide farmer;
• a certified copy of an environmental impact assessment, with its outcome, if such a study has been conducted; and
• in the case of an application for a petrol consumer installation, a signed declaration by an accountant or auditor registered under the Public Accountants’ and Auditors’ Act, 1951 (Act No 51 of 1951), that the applicant has, for a consecutive period of at least three months, consumed more than 10,000 litres of petrol per month, and further proof must also be submitted that the 10,000 litres of petrol was obtained from the same supply point.

Neither the Petroleum Act nor the Petroleum Products Act, make provision for the issuing of midstream licences.

Price of Fuel

At wholesale level, the price of fuel is regulated by the Basic Fuel Price formulae.

The Minister may, by way of regulation, prescribe the price, or a maximum and minimum price, at which petroleum products may be sold, or determine that the products may be sold without any restriction to the selling price. As such, no retail licence-holder may supply, or offer to supply, petrol at a retail outlet other than by way of sale at the price determined under the Petroleum Products Act.

The Petroleum Products Act provides measures for the saving of petroleum products, and economy in the cost of their distribution. It further provides measures for:

• the maintenance of the relevant prices;
• control of the furnishing of certain information regarding petroleum products; and
• the rendering of services of a particular kind, or services of a particular standard, in connection with motor vehicles.

The Petroleum Products Act also provides for the establishment and utilisation of the National Energy Fund and for the establishment and functioning of the National Energy Council. Finally, the aforesaid Act provides for the imposition of levies on fuel.

The Minister may impose a levy, for the benefit of the National Energy Fund, on any petroleum product, electricity, natural gas or liquefied natural gas, hydropower or windpower, nuclear, geothermal, biomass or any other energy source which is manufactured, generated, transmitted, distributed or sold at any point in Namibia, or which is imported into Namibia.

The Income Tax Act 24 of 1981, as amended, provides for Companies Tax at 32% and withholding tax of 10% imposed on all management, consulting, technical and administrative services paid by a resident to a non-resident, subject to the provisions of any double-taxation agreements. Service fees payable to foreign directors and foreign entertainment fees attract withholding tax of 25%.

The Value Added Tax Act 10 of 2000 currently rates VAT at 15%.

The Stamp Duties Act 15 of 1993 provides for the collection of stamp duties on instruments at rates determined in the schedule to the Act.

Namcor has no special rights in connection with midstream/downstream licences.

There are no statutory local content requirements applicable to midstream/downstream operations by private investors.

A number of general conditions apply to all wholesale licences. These include:

• compliance with the Petroleum Products Act and the Regulations issued thereunder;
• compliance with labour, safety, hazardous substances, security, health and environment legislation;
• sale in bulk quantities only from dispensing points situated at the relevant premises of the wholesaler;
• obtaining all relevant import, export and wholesale approvals and permits as required under the Petroleum Products Act or any other applicable law prior to any import into, export from or wholesale sale of fuel in Namibia; and
• record-keeping and submission of such information to the Minister as is required by or under the Regulations.

Petroleum products that are imported or distributed must comply with approved specifications as applicable under the Regulations. The wholesale licence-holder may not abandon storage facilities other than in accordance with these Regulations.

Similarly, a retail licence-holder must:

• comply with the Petroleum Products Act and the Regulations and all other applicable laws, including laws relating to labour, safety, hazardous substances, security, health and the environment;
• inform the Minister of any dangerous situation, including the steps taken or proposed to be taken to rectify such situation or to eliminate or minimise the danger arising from such situation;
• keep records and submit information to the Minister as required by the Regulations;
• comply with the Regulations relating to petroleum product spills;
• ensure compliance with the approved specifications of petroleum products sold to consumers;
• at all times hold such permits, licences and certificates relating to the sale of petroleum products and other services provided at the retail outlet, as may be required by any other law; and
• only obtain fuel for retail sale from a wholesale licence-holder.

If a licence-holder or certificate-holder wishes to abandon the relevant premises, then the licence-holder or certificate-holder must inform the Minister of the intended date of closure, change or abandonment at least one month in advance. A licence-holder or certificate-holder has a duty to sufficiently restore such premises so that they do not pose a threat to the environment or to the health and safety of the public.

A private investor constructing infrastructure does not have condemnation/eminent domain rights.

At present, there are no third-party access regime/rights applicable in Namibia in respect of oil and natural gas transportation and the associated infrastructure.

In terms of the Regulations, no person may:

• operate a retail outlet or conduct the business of a wholesaler unless authorised to do so under a retail licence or a wholesale licence, respectively; or
• operate a consumer installation unless authorised to do so under a certificate.

Criminal sanctions may follow should a person fail to comply with these provisions. 

No retail licence-holder may dispense any fuel directly into the tank of a fuel-driven vehicle or vessel other than against payment in cash, and no person may receive fuel from a retail licence-holder dispensing it to the person directly into the tank of such vehicle or vessel other than against payment in cash.

There are no limitations on concurrent ownership or the use of intermediaries.

Crude Oil

No provision is made for cross-border sales and deliveries of crude oil or crude oil products under the Petroleum Act.

Although the price-setting regime for crude oil products is not regulated under the Petroleum Act, the Model Form Petroleum Agreement typically provides that crude oil produced and saved from the licence area may be sold or otherwise disposed of at competitive market prices, ie, a sale between a willing purchaser and a willing seller acting in good faith. In the event of any dispute arising between the licence-holder and the Minister of Mines and Energy concerning the pricing of crude oil, the dispute will be resolved by a sole expert to be appointed by agreement between the parties or, failing agreement, by the president of the British Institute of Petroleum.

Used Mineral Oil

The Regulations published in terms of the Petroleum Products Act deal with the transportation of refined petroleum. The Regulations, however, only require permits for the transportation, possession and storage of used mineral oil in certain containers, not crude oil. "Used mineral oil" means all mineral oil withdrawn from its original use and contaminated by foreign matter through this use. Regulations published in terms of the Petroleum Products Act also deal with the transport of oil. The Regulations provide for transport facilities and the transport, storage and use of hazardous substances.

Export Levy

The Export Levy Act 2 of 2016 provides for the imposition of an export levy on certain goods. A 1.5% rate is levied on unrefined crude oil of all types exported from Namibia. Refined oil of all types carries a zero rate.

A wholesale licence or certificate is not transferable. A retail licence is not transferable except by way of amendment of the licence.

The Petroleum Products Act does not make provision for the assignment of interests in retail and wholesale licences. No government approvals are, however, required for the sale of shares in a company that owns a licence.

International Treaties and Protocols

Namibia has signed, acceded to and ratified numerous international treaties and protocols which affect the application of its domestic laws. Article 144 of the Namibian constitution provides that the general rules of public international law and international agreements binding upon Namibia under the constitution form part of the law of Namibia.

The legal authority to expropriate is provided for in Article 16(2) of the Namibian constitution. The article empowers the state, or any competent body or organisation authorised by law, to expropriate property in the public interest, subject to the payment of just compensation. Accordingly, the requirements of expropriation involve public interest and just compensation authorised by law. Expropriation may be consensual or, where necessary, forced. Forced expropriation is only possible in matters involving land rights.

The government does not generally accede to stabilisation or economic rebalancing provisions in petroleum agreements. There are, however, no statutory limitations imposed on the government to agree to such terms.

Negotiation

The Model Form Petroleum Agreement provides that any dispute arising between the parties relating to the construction, meaning or effect of the agreement, or the rights or liabilities of the parties in terms of the agreement, must first be resolved amicably by negotiation.

Arbitration

If the Minister and the licence-holder fail to resolve a dispute by way of negotiation, either party may submit the dispute to arbitration for final settlement.

Any unresolved dispute will finally be settled by arbitration in accordance with the Arbitration Rules of the United Nations Commission on International Trade Law in force on the date on which the agreement is signed. This arbitration, unless the parties agree otherwise, will usually take place in London, England. As far as is practicable, the Minister and the company will continue to implement this agreement while the arbitration is pending and during arbitration.

Namibia is a United Nations (UN) member state and has an obligation to comply with United Nations Security Council (UNSC) Resolutions. The sanctions issued by the UN are considered and composed by the Security Council, under the authority of Article 41, Chapter VII of the UN Charter.

That said, Namibia has no sanctions in place with respect to investing in oil and gas assets in certain foreign jurisdictions, or conducting business in the oil and gas sector with certain foreign counterparties or governments, or in certain foreign jurisdictions.

Environmental Management Act

The Environmental Management Act 7 of 2007 (EMA) requires holders of petroleum licences to be issued with environmental clearance certificates before they commence activities in terms of their licences. The EMA is accompanied by two sets of regulations. The first set of regulations lists the activities that may not be conducted without an environmental clearance certificate, published according to the terms of Section 27 of the EMA. The second set deals with environmental impact assessments (the "EIA Regulations") and was published according to the terms of Section 56 of the EMA. The state is also bound by the EMA.

A Competent Authority

A "competent authority" refers to an organ of state which is responsible, under any law, for granting or refusing an authorisation, including a competent authority identified in terms of the EMA. For example, the Minister of Mines and Energy is the relevant competent authority in respect of mineral and petroleum exploration and production operations. An "authorisation" refers to an approval, licence, permit or other authorisation by a competent authority in respect of a listed activity.

Where no person or authority is charged with the responsibility of granting authorisations in respect of a listed activity according to the terms of any other law, the Minister must, in the same notice that lists the activities that may not be undertaken without an environmental clearance certificate, identify a person or authority who or which is responsible for granting authorisation in respect of that activity. The Minister may be identified as the competent authority. The Minister may also agree with an organ of state that applications for environmental clearance certificates in respect of which the Minister is identified as the competent authority, may be dealt with by that organ of state.

Environmental Clearance Certificate

Before submitting an application for an environmental clearance certificate, the proponent must determine whether the activity for which the clearance certificate is required is in fact a listed activity. In order to do so, the proponent may consult with the Environmental Commissioner, the competent authority or any relevant guidelines. If the proponent has determined that the proposed activity is a listed activity, they must apply for an environmental clearance certificate.

Application for this certificate must be made by the proponent on the prescribed form and in the prescribed manner (accompanied by the prescribed fee) to the relevant competent authority. 

The proponent must designate an environmental assessment practitioner (EAP) to manage the assessment process. The EAP must have knowledge of and experience in conducting assessments, including knowledge of the EMA and the EIA regulations and guidelines that have relevance to the proposed activity.

Public Consultation Process

After submitting an application for an environmental clearance certificate, the proponent must conduct a public consultation process, which must be completed within 21 days. This process must be conducted whether or not an assessment is required. The person conducting the public consultation process must give notice of the application to all potential interested and affected parties so that the application can be subject to public consultation.

The proponent must consider all objections and representations received from interested and affected parties following the public consultation process and subject the proposed application to scoping by assessing the potential effects of the proposed listed activity on the environment, whether and to what extent these potential effects can be mitigated, and whether there are any significant issues and effects that require further investigation.

After submission of an application for an environmental clearance certificate, the proponent must prepare a scoping report and give all interested and affected parties an opportunity to comment on the scoping report.

A registered interested or affected party is entitled to comment, in writing, on all written submissions made to the Environmental Commissioner by the applicant responsible for the application. The party may also bring to the attention of the Environmental Commissioner any issues which they believe may be of significance to consideration of the application, as long as comments are submitted within seven days of notification of an application or of receiving access to a scoping report or an assessment report, or of the interested and affected party disclosing any direct business, financial, personal or other interest which that party may have in the approval or refusal of the application.

Before the applicant submits a report compiled in terms of the EIA Regulations to the Environmental Commissioner, the applicant must give registered interested and affected parties access to, and an opportunity to comment in writing on, the report. Here, the "report" includes scoping reports, amended and resubmitted scoping reports, assessment reports, and amended and resubmitted assessment reports.

Any written comments received by the applicant from a registered interested or affected party must accompany the report when it is submitted to the Environmental Commissioner. A registered interested or affected party may comment on any final report that is submitted by a specialist reviewer for the purposes of the EIA Regulations where the report contains substantive information which has not previously been made available to a registered interested or affected party.

The applicant responsible for an application must ensure that the comments of interested and affected parties are recorded in reports submitted to the Environmental Commissioner in terms of the EIA Regulations. Comments by interested and affected parties on a report which is to be submitted to the commissioner may be attached to the report without recording those comments in the report itself.

The 1999 Regulations published according to the terms of the Petroleum Act deal with the health, safety and welfare of persons employed, and the protection of other persons, property, the environment and natural resources, in, at or in the vicinity of exploration and production areas. These regulations are administered by the MME and are binding on all licence-holders. Extensive employee health and safety regulations published in terms of labour legislation are also applicable and binding on all employers. These regulations are administered by the Ministry of Labour. They require, among other things, that a health and safety representative be appointed. Penalties range from fines to potential criminal liability and imprisonment.

The Petroleum Act deals with decommissioning. According to its terms, an application for a petroleum licence must contain a proposed programme of production operations and of the processing of the petroleum in question, which must include separate decommissioning plans in respect of the production area, and any area outside the production area, within which activities in connection with the production operations are being carried out. This must set out to the satisfaction of the minister of mines and energy (acting in consultation with the minister of environment and tourism, the minister of fisheries and marine resources, and the minister of finance), the measures proposed to be taken after cessation of the production operations to remove or otherwise deal with all installations, equipment, pipelines and other facilities, whether onshore or offshore, erected or used for the purposes of the operations, and to rehabilitate land disturbed by way of the operations. It must include:

• the estimated date by which such decommissioning will occur;
• the extent of the decommissioning;
• the manner in which the decommissioning will take place;
• the estimated costs of the decommissioning; and
• such other measures or information as the Minister may require.

Review and Revision of the Decommissioning Plan

On a date one year before the estimated date on which 50% of the estimated recoverable reserves of petroleum in the production area would have been produced, the holder of the production licence must review and, if necessary, revise the decommissioning plan. The Minister may, acting in consultation with the minister of environment and tourism, the minister of fisheries and marine resources, and the minister of finance, approve the reviewed or revised decommissioning plan or refer it back to the holder of the production licence concerned to make such amendments as the Minister may deem necessary. 

Trust Fund

On a date before the estimated date on which 50% of the estimated recoverable reserves of petroleum in the production area would have been produced, the holder of a production licence must establish a trust fund for the purposes of decommissioning facilities. A separate trust fund must be established in respect of the decommissioning of facilities in any area outside the production area where the facilities are used in connection with the production operations of the holder of the production licence in question. The decommissioning trust funds are exempt from all taxes, except those imposed according to the terms of the Petroleum Taxation Act. 

The holder of the licence is responsible for meeting the full costs of decommissioning in accordance with the decommissioning plan, notwithstanding the fact that there may be a shortfall between the full costs and the accumulated amount in the trust fund.

Namibia became a signatory of the Paris Agreement on Climate Change in New York, on 22 April 2016. However, there are no climate change laws in effect in Namibia.

Local authorities do not have the power to limit oil and gas development for environmental or other reasons.

However, under Section 16 of the Petroleum Act, the holder of a petroleum licence may not exercise any of the rights in terms of the licence in, on or under any town or village, land comprising a public road, aerodrome, harbour, railway or cemetery, or land used or reserved for any government or public purpose, except with the approval of the Environmental Commissioner granted by notice in writing and subject to such conditions as may be specified in the notice. Furthermore, the holder of a licence may not, except with the permission of the owner of the land or works on which it proposes to exercise such right, obtained in writing in advance of every particular case, exercise any rights conferred upon them by the Petroleum Act or under any terms and conditions of a petroleum licence in, on or under any land:

• used as a garden, orchard, vineyard, nursery, plantation, or which is otherwise under cultivation;
• within a horizontal distance of 100 m of any spring, well, borehole, reservoir, dam, dipping tank, waterworks, perennial stream, artificially constructed watercourse, kraal, building or any structure of whatever nature;
• within a horizontal distance of 300 m from any point on the nearest boundary of any erf, as defined in Section 1 of the Townships and Division of Land Ordinance 11 of 1963, if the erf has been surveyed for the purpose of inclusion in a township as defined in that section; or
• on which accessory works, as defined in Section 1 of the Mines, Works and Minerals Ordinance 20 of 1968, were erected under that ordinance and which existed at the time the licence in question was issued.

Finally, the holder of a petroleum licence may not exercise any of the rights conferred upon them by the Petroleum Act or under any terms or conditions of a petroleum licence in, on or under any mining area that existed at the time of issuance of the licence in question. The Minister may, however, permit the holder in writing to exercise their rights in, on or under a mining area, after consultation with the owner of the mining area. Permission in writing from the Minister must be obtained in every case.

There are no special schemes, laws or regulations relating to unconventional upstream interests in Namibia under the Petroleum Act.

No special scheme relating to LNG projects is in place under the Petroleum Act.

The mandate of the MME remains to take custody of the diverse geological, mineral and energy resources of Namibia, and to ensure their contribution to the country’s socio-economic development. In so doing, its vision is to provide access to Namibia’s geological, mineral and energy resources for the sustainable economic growth, equal benefit and prosperity of all Namibian citizens.

In the context of the energy transition narrative, the Government of the Republic of Namibia has recognised Namibia’s potential to become a global renewable energy powerhouse given its unique endowment of renewable resources and vast land area. In so doing, apart from other renewable energy resources, the government has become invested in exploring opportunities in low-cost green hydrogen production.

Notwithstanding this strategic positioning, the government remains supportive of and seeks to attract more investment in oil and gas exploration and production, locally, regionally and internationally, to ensure a more diversified economy in Namibia. 

During February 2022, TotalEnergies and Shell made significant light oil and associated gas discoveries off the coast of Namibia. Both projects have progressed to the appraisal stage, to determine the commercial interests of these discoveries.

In due course, more information should emerge concerning particulars of such appraisal and determination.

The aforesaid discoveries are the first since Chevron Texaco’s discovery of the Kudu gas field, off the Namibian coast in 1974.

During November 2018 the MME began a consultative process with industry stakeholders to introduce various amendments to the Petroleum Act, and new regulations to be promulgated under the proposed amendments. The industry has made submissions regarding the proposed amendments and regulations and is at present awaiting the MME’s feedback. The consultative process is still to be finalised and the proposed amendments are yet to be promulgated.