Oil, Gas and the Transition to Renewables 2024 Comparisons

The Namibian Constitution, which is the supreme law of the country, prescribes that all natural resources below and above the surface of the land and in the continental shelf and within the territorial waters and the exclusive economic zone of Namibia shall belong to the state if they are not otherwise lawfully owned. Consequently, the state holds the exclusive ownership and exploitation rights of petroleum resources. The Minister, representing the state, can grant exploitation rights to applicants under the terms of the Petroleum (Exploration and Production) Act No 2 of 1991 (“the Petroleum Act”).

The process to obtain approvals and permits in Namibia is quite fragmented, in that permits and approvals must be obtained from different ministerial bodies and regulatory authorities. However, the Principal regulatory body is the Directorate of Petroleum Affairs within the Ministry of Mines of and Energy. The Minister of Mines and Energy heads the Ministry and is vested with powers to issue and award petroleum licences. The Minister appoints the Petroleum Commissioner and Chief Inspector who are supported by designated officers.

The Petroleum Act further makes provision for the establishment of the Ancillary Rights Commission. The Petroleum Ancillary Rights Commission addresses disputes between licensees and landowners. The Ministry of Environment, Forestry and Tourism, which issues environmental clearance certificates, is likewise an integral regulatory body.

The national oil company of Namibia is the National Petroleum Corporation of Namibia (Pty) Ltd (Namcor) and is a private company duly incorporated under the company laws of Namibia, wholly owned by the government of the Republic of Namibia. Namcor has various subsidiaries, notably, NAMCOR Exploration and Production (Pty) Ltd which is primarily involved in the exploration and production of Namcor’s upstream assets. Namcor derives its statutory powers from Section 8 of the Petroleum Act.

The Petroleum Act as Amended

The principal hydrocarbon law is the Petroleum Act (including all amendments), which provides for the reconnaissance, exploration, production and disposal of, and the exercise of control over, petroleum in Namibia and prescribes the Royalty payable on petroleum. No person may carry on any operations in respect of petroleum operations without the necessary licence issued by the Ministry of Mines and Energy (MME).

The Petroleum Taxation Act

The Petroleum (Taxation) Act 3 of 1991 applies to upstream petroleum activities and imposes a petroleum income tax and additional profit tax on income received in connection with exploration operations, development operations or production operation.

Model Form Petroleum Agreements

An applicant for a petroleum licence must enter into a Model Form Petroleum Agreement with the state. The model form petroleum agreement, with necessary modifications resulting from negotiations between the inter-ministerial Government Negotiation Team (GNT) and the applicant, must be executed before an exploration or production licence is issued to an applicant.

The Environmental Management Act 7 of 2007 and Regulations

The exploration and production of petroleum is a listed activity, and the Environmental Management Act and the relevant regulations prescribe that no listed activity may be undertaken without an environmental clearance certificate.

Property Law

The right under the petroleum exploration licence is a limited real right equivalent to a property right and it can be enforced and protected by the holder in terms of Article 16 (1) of the Namibian Constitution. Article 16 (2) of the Namibian Constitution, however, provides that the state or a competent body or organ authorised by law may expropriate property in the public interest subject to the payment of just compensation, in accordance with requirements and procedures to be determined by Act of Parliament. There are, however, no provisions under the Petroleum Act for the expropriation of an interest in a licence. Licences may, however, be cancelled under certain conditions.

Other Legislation

Other relevant laws (excluding tax laws which are highlighted herein below) applicable to the upstream petroleum sector include the Companies Act 28 of 2004, Currency and Exchange Act 9 of 1933, Immigration Act 7 of 1993, Exchange Control Regulations of 1961, the Explosives Act 26 of 1956, the Water Resources Management Act 11 of 2013, the Atmospheric Pollution Prevention Ordinance 11 of 1976, the Prevention and Combating of Pollution of the Sea by Oil Act 6 of 1981, the Marine Act, Act 27 of 2000, Import and Export Control Act 30 of 1994, Namibian Ports Authority Act 2 of 1994 and the Atomic Energy and Radiation Protection Act 5 of 2005 to name but a few.

Generally, investment in the upstream sector commences with the acquisition of a petroleum exploration licence. The issuance of a licence is provided for under the Petroleum Act and administered by the Petroleum Commissioner. A licence grants the holder specific rights to explore, or produce oil, both onshore and offshore in Namibia, as the case may be. Next, the authors look at the types of licence that are issued in terms of the Petroleum Act. (See 2.2 Issuing Upstream Licences/Obtaining Hydrocarbon Rights.)

Reconnaissance Licence

A Reconnaissance Licence allows its holder to carry on reconnaissance operations. Reconnaissance operations is defined as the carrying out of or in connection with the search for petroleum through geological, geophysical, and photo-geological surveys, and include remote-sensing techniques in the block(s). A reconnaissance licence has an initial term of two years and may typically be renewed for a period not exceeding two years at a time. It may only be renewed twice.

Exploration Licence

An Exploration Licence allows its holder to carry on exclusive exploration operations in the block(s), for which the licence has been approved. “Exploration operations” are any operations or activities carried out for or in connection with the exploration for petroleum, they may include geological, geophysical, geochemical and other surveys, as well as drilling to determine the presence and feasibility of petroleum production. An exploration licence is valid for an initial maximum period of four years (initial exploration period). An exploration licence shall be valid for such further period, not exceeding two years (renewal periods), as may be determined by the Minister at the time of the renewal. An exploration licence may not be renewed on more than two occasions, however, the Minister may, if he or she deems it in the interest of the development of the petroleum resources of Namibia, determine that any exploration licence may be renewed on a third occasion for such period not exceeding two years.

Notwithstanding the initial exploration and the renewal period, the Minister may, upon an application, extend the initial exploration period to a further 12 months, not exceeding five years in total and in the case of renewal periods, extend the period to a further 12 months not exceeding three years in total.

Production Licence

A production licence authorises its holder to exclusively carry out production operations on the block(s), in respect of which consent was obtained, and to sell or dispose of petroleum recovered within such block(s), subject to the terms provided under the Petroleum Act. A production licence has an initial term of 25 years and may be renewed only once for ten years. A production licence may not be renewed on more than one occasion. The maximum duration of a production licence is therefore 35 years.

Content of Application for Petroleum Exploration Licence

To obtain a licence, the process involves submitting an application through an open bidding system. Applicants must demonstrate both technical expertise and financial capacity to fulfil the proposed minimum work commitments and cover anticipated expenditures. The application must at minimum contain:

• the company’s name, along with details of its incorporation and registration;
• information regarding the directors’ names and nationalities;
• details about the company’s share capital and any individual who holds more than 5% of the shares.
• the specific block or blocks to which the application pertains;
• proposed minimum operations and expenditure for the identified block or blocks;
• detailed information on previous expertise of drilling exploration and production wells;
• a detailed programme for each period (initial period and renewal period) outlining these operations and associated expenditures;
• technical (geological and geophysical) evaluation of the Block(s) applied for based on the available data, detailed evaluations of prospects (if identified), Petroleum geological maps for the Block(s);
• the projected timeline for executing the operations and completing the expenditures;
• the financial capability (Current ratio & Debt-to-equity ratio) of the company;
• provisions to include a local partner company if a local partner company is not already identified; and
• information on how the company intends to train Namibians.

Application

An application for a petroleum exploration licence (PEL), in respect of the identified blocks available at that time, must be submitted in duplicate to the Ministry of Mines and Energy in both hardcopy and electronic format and must include the details and requirements prescribed by the Petroleum Act. The supporting documents, inter alia, include the proof of payment (NAD30,000) as well as the audited financial reports of the company for the previous three years.

Royalties

Prior to the Amendment Act 24 of 1998 the holder of a production licence shall pay 12½% royalty on the market value of petroleum produced and saved in the production area during each quarter. However, after the enactment of the Amendment Act 24 of 1998 (after 4 September 1998) the royalty payable is 5% on the market value of petroleum produced and saved in the production area during each quarter.

Taxable Income

Petroleum income tax is set at 35%. Each licensed area is evaluated independently, prohibiting the offsetting of losses from one area against profits from another.

Additional Profit Tax

An incremental three tiered APT is charged on the after-tax net cash flow from petroleum operations in each Licence Area separately.

Annual Licence Area Rental Charge

Annual rental fee is calculated by multiplying the km² of the block(s) to which the licence relates, by NAD60 for the Initial Exploration Period and NAD1,500 for Production Licence. The rental fee varies for the renewal period.

When any person has failed to pay an amount on or before the date determined by or under this Act or the terms and conditions of a licence, an additional amount, calculated at the rate of one-third of 1% per day, shall be payable on such amount or any part thereof as from the date on which such amount was payable until such time as such amount is paid.

Annual Training Fee

The annual training fee is subject to negotiation between the applicant and the Inter-Ministerial Government Negotiating Team.

Other Applicable Tax Laws

Additional tax laws relevant to the oil industry include:

• The Income Tax Act 24 of 1981, as amended, imposes a 10% withholding tax on payments made by residents to non-residents for management, consulting, technical, administrative, and entertainment services, subject to any double-taxation agreements. Payment for services rendered by foreign directors and foreign entertainment fees attract a withholding tax rate of 25%. The normal income tax rate of 31% effective 1 January 2024 applies to service companies.
• The Value Added Tax Act 10 of 2000, which currently rates VAT at 15% (transaction may qualify for zero rated supply if specific prescriptive requirements are met).
• The Stamp Duties Act 15 of 1993, which mandates the collection of stamp duties on various instruments at rates determined in the schedule to the Act.
• The Export Levy Act 2 of 2016 which imposes a 1.5% export levy on all types of unrefined crude oil.
• Customs and Excise Act 20 of 1998 provides for the levying, imposition, payment and collection of customs and excise duties, of a surcharge and of a fuel levy.

Namibia Revenue Agency (NamRA) is the nation’s tax collecting authority. Established in terms of the Namibia Revenue Agency Act 12 of 2017 as an autonomous agency, NamRA has wide powers and is responsible for administering and enforcing tax laws and customs and excise requirements.

See 2.3 Typical Fiscal Terms: Upstream. The Petroleum Taxation Act prescribes that no tax shall be chargeable under the Income Tax Act 24 of 1981 in respect of any dividends, as defined in Section 1 of the Income Tax Act, paid out of profits from any such income.

Namcor’s functions are prescribed in Section 8 of the Petroleum Act. At this stage, Section 8 of the Petroleum Act does not obligate Namcor to have a participating interest in any licence. However, in practice, Namcor receives a 10% participating interest upon the granting of an exploration licence. When applying for petroleum exploration licence, it is advisable to make provision for Namcor’s 10% interest or more and also make provision for carried interest for a local company. The exact participating interest of Namcor and the local partner is normally subject to negotiations between the applicant and the Inter-Ministerial Government Negotiating Team.

There has always been statutory recognition for local content within the petroleum sector. This much is evident in the Petroleum (Exploitation & Production) Act 2 of 1991 as well as the operational Namibian Model Petroleum Agreement. The relevant provisions and clauses make it mandatory for licence holders to comply with local content provisions in the Petroleum Act and the Model Petroleum Agreement. Furthermore, by extension, contractors/service providers are also bound by the local content provisions. The Minister is empowered, subject to the audi alterem partem rule, to cancel a licence for failure to comply with the local content provisions. The following local content provisions appear in the Model Petroleum Agreement and Section 14 of the Petroleum Act.

Petroleum Act:

• in the employment of employees to give preference to Namibian citizens who possess appropriate qualifications for purposes of the operations to be carried out in terms of such licence;
• carry out training programmes in order to encourage and promote the development of such citizens;
• make use of products, equipment and services which are available in Namibia; and
• transfer skills and knowledge to Namibians.

Model Petroleum Agreement:

• use and purchase goods supplied, produced and manufactured in Namibia;
• consider local technical and economic efficiency by utilising products, equipment, and services available within Namibia;
• collaborate with other stakeholders in the petroleum industry to enhance the skills and technological capabilities of Namibian citizens, benefiting the industry in Namibia;
• give preference to Namibian supplier, producer or manufacturer and give preference to use of contractors in Namibia where services of comparable standards with those obtained elsewhere are available; and
• when importing vehicles, machinery, plant or equipment and such vehicles, machinery, plant or equipment are not purchased directly from a manufacturer, licence holder to effect the purchase of the items through traders operating in Namibia at competitive prices.

In addition to the above stated requirements, the Ministry of Mines and Energy is presently finalising a comprehensive local content policy to maximise the benefits to be gained from petroleum and other industries for the benefit of Namibian citizens. The authors understand that the Ministry of Mines and Energy is in the process of finalising the appointment of an external consultant to finalise the local content policy. The Ministry of Mines and Energy has also in the past reported that the Ministry seeks to undertake an extensive country-wide consultative process and thereafter submit the policy to the cabinet for approval and finalisation.

Discovery

When a discovery is made in an exploration area, the licensee must promptly notify the Petroleum Commissioner in writing. Within 60 days of this notification, the licensee must provide the Petroleum Commissioner with written details about the specific block or blocks where the discovery occurred, the nature of the discovery, and any additional information requested by the Commissioner.

The licensee is required to conduct tests related to the discovery to ascertain its commercial potential, and, within a period of 60 days of completing these tests, prepare a report containing the evaluated results and an assessment of the discovery’s commercial viability to be submitted to the Petroleum Commissioner.

If it appears from the report that the discovery may be of commercial interest, the licence holder must proceed to appraise the discovery. Upon completion of the appraisal, a detailed report outlining the findings and conclusions must be furnished to the Petroleum Commissioner.

The holder of the licence can then apply to have the discovery block declared as a petroleum field. This declaration must be made by the Minister within 90 days of the application and published in the government gazette. If the Minister fails to make the declaration, a licence holder may approach the High Court seeking relief to compel the Minister to make such a declaration.

Once a petroleum field has been declared in terms of Section 42, Section 43 allows the holder of the licence, within two years of the declaration or within an extended period allowed by the Minister, to apply for a production licence for that petroleum field.

Applying for a Production Licence if Discovery is Commercial

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;
• estimated production capacity and operational scope;
• estimated overall petroleum recovery and recovery of any by-products;
• characteristics of the petroleum and its by-products;
• sales arrangements for the petroleum and by-products;
• strategies for pollution prevention, waste management, natural resource protection, and mitigation of operational impacts on adjacent land:
1. Separate decommissioning plans for the production area and associated facilities must be included. These plans must satisfy the Minister, in consultation with relevant ministries responsible for environment, fisheries, and finance, regarding the measures proposed post-production cessation. Plans should detail an estimated decommissioning timeline.
2. The scope of such decommissioning.
3. The method such decommissioning would take place.
4. The estimated decommissioning costs.
5. Any additional measures or information required by the Minister; and
• the application must address potential environmental impacts of production operations and outline measures to manage or mitigate these effects.

Relinquishment Requirements

The Petroleum Act requires the holder of an exploration licence to relinquish, not later than 30 days before the end of the fourth year of the currency of such licence, at least 50% of the exploration area to which such licence relates and if renewed, not later than 30 days before the end of the sixth year of such currency, at least a further 25% of such exploration area, whereupon any part of the exploration area so relinquished shall cease to be part of such exploration area.

It is, however, important to note that the Petroleum Agreement may provide for a relinquishment on any other basis provided for in the Petroleum Act, depending obviously on what was agreed between the licence holder and the government during the negotiations of the Petroleum Agreement.

Having regard to the mandatory requirement to relinquish, the Minister may, on application made to him or her by a holder of an exploration licence concerned, exempt such holder from the relinquishment provisions of Petroleum Act if the Minister deems it desirable in the public interest and in the interest of the development of the petroleum resources of Namibia.

Natural Gas

The Model Petroleum Agreement differentiates between Non-Associated Natural Gas and Associated Natural Gas. If, in the course of its exploration operations the Company makes a Discovery of Non-Associated Natural Gas (Natural Gas other than Associated Natural Gas), the Company shall promptly inform the Minister by notice in writing of the Discovery and follow the prescribed procedure.

Further, if there are reasonable grounds for believing that Natural Gas associated with Crude Oil (associated natural gas) is in such quantities as to enable its commercial exploitation without detriment to the efficient and effective recovery of Crude Oil from the Petroleum Reservoir, the Company shall promptly inform the Minister by written notice of the existence of such grounds and shall undertake a market feasibility study to determine the commercial viability of such exploitation.

The holder of an exploration licence shall not flare any combustible gas, except for purposes of testing such gas, or for operational reasons or with the approval in writing of the Minister and in accordance with such terms and conditions as may be determined by the Minister.

Drilling requirements

There are specific reports and documents that must be submitted to the Ministry of Mines and Energy for review prior to the commencement of drilling operations. There are further additional permits that must be obtained prior to the commencement of drilling operations, both onshore and offshore.

Exemptions

Goods imported for use solely in operations in connection with the prospecting for, or the mining of, natural oil or natural gas may qualify as exempted imports. Duty exemption may also apply to goods cleared from a customs and excise warehouse for petroleum exploration or production activities. Specific procedures need to be complied with to qualify for exemption.

No individual may transfer a petroleum licence or grant, cede, or assign any interest in such a licence to another party without the Minister’s written approval. Licences can only be transferred, or interests granted, ceded, or assigned, to a company, and only another company may become a joint holder of a petroleum licence.

The transfer, cession, or assignment of interest in a licence must be carried out through an application to the Petroleum Commissioner. There is no prescribed format and in practice the application normally includes a cover letter detailing the transaction and reasons therefor accompanied by Deed of Novation, Assignment and Amendment (Stamp Duty affixed thereto). The application must include details about the assignee’s financial and technical capability to meet the work obligations under the petroleum agreement. The applicant is normally required to submit two or more counterparts. The Minister has the discretion to approve or deny such an application on terms and conditions they deem appropriate.

The processing of such an application generally takes around one to two months. The application fee for transferring an exploration licence or interest therein is NAD30,000. There are no statutory pre-emptive rights reserved for the state as is the case in the mining sector. The granting, ceding or assigning of any interest in a licence shall not affect any obligation or liability of the holder of the licence imposed in terms of such licence or any provisions of this Act.

At this stage, especially if the transfer, cession, or assignment of interest or licence does not involve Namcor, the Farm-Out Agreement or the Purchase and Sale of Asset Agreement is normally not submitted to the Ministry of Mines and Energy for review. However, the authors expect that the Minister may soon request for the Agreement between Purchaser and Seller (or Farmee and Farmor) to assess the commercial terms for various purposes including tax.

The Petroleum Agreements does not contain any change of control restrictions and a change of control of a company party to a petroleum agreement is not subject to the Minister of Mines and Energy’s consent under the Petroleum Act. However, if the change of control includes an operator, the Model Form Petroleum Agreement usually stipulates that the Petroleum Commissioner’s consent is necessary for a change of operator. Further, in the event where Namcor is the party relinquishing or acquiring interest, Namcor is required to obtain various approvals, including approvals prescribed in the State Finance Act 31 of 1991.

If petroleum is not being recovered in a production area where the Minister believes petroleum is recoverable, or if the recovery rate is deemed by the Minister to be against the public interest, considering the reservoir’s capacity, the Minister may, by written notice to the holder of the production licence, direct them to take necessary and practicable steps (adhering to good oilfield practices) to recover petroleum or adjust (to increase or reduce) the recovery rate. In addition, the Minister may, due regard being had to good oilfield practices, by notice in writing addressed and delivered to the holder of a licence, give directions to such holder in relation to the rates or the determination of rates at which petroleum may be recovered from any well drilled for purposes or in connection with reconnaissance operations, exploration operations or production operations, or from any petroleum reservoir.

Downstream petroleum trading is regulated under the Petroleum Products Regulations 2000 (the “Regulations 2000”), passed under the Petroleum Products and Energy Act 13 of 1990 (the “Petroleum Products Act”). The various licences issued by the Petroleum Affairs Directorate in respect of the downstream sector are the following licences/certificate/permit: Retail Licence, Wholesale Licence, Consumer Installation Certificate and Used Mineral Oil Permit.

No national monopoly exists in Namibia. It is, however, worth mentioning that in the past, Namcor had a statutory mandate to exclusively source 50% of Namibia’s annual fuel requirements which has since been revoked. In 2019, Namcor was in consultation with government to have the mandate restored, however this was not approved by the Namibian Competition Commission due to various objections. Thus, presently, no national monopoly exists.

Retail Licence

Before a prospective applicant decides to construct a Retail Outlet, the prospective applicant must submit a Letter of Intent accompanied by a comprehensive Business Plan to the Ministry for a fuel retail site viability assessment.

Following the outcome of the fuel retail site viability assessment, the interested applicant will be informed whether the proposed site would be viable or not. For sites that are deemed viable, interested applicants will be required to submit an application for a retail licence. The application form PP/1 must be accompanied by:

• a letter that indicates site viability by MME;
• a certified copy of a company registration documents;
• a proof of payment of applicable application fees (NAD100);
• a certified copy of an Environmental Clearance Certificate;
• a written confirmation by the supplying wholesaler that it agrees to supply fuel to the applicant;
• a signed declaration by the applicant that there is sufficient capital available for the operation of a retail outlet;
• attach three sets of final approved designs or construction drawings of all buildings, roadworks, structures, and outlet to be erected on the proposed premise(s); and
• a surveyor’s certificate of the area measure of the licensed premises with an indication of the position of the outlet on the premises.

No construction of a fuel retail site shall commence without a fuel retail licence.

Wholesale Licence

An applicant must complete the prescribed form PP/3. The application form must be accompanied by the following.

• Proof of payment (receipt) of prescribed application fees (NAD100).
• Certified copy of company registration documents, Inland Revenue and Social Security Commission Good Standing Certificates.
• Details of all retail outlets and consumer installations (including their petroleum licence/certificate numbers) and respective supply agreements to which applicant intends to supply.
• Comprehensive business plan.
• A signed and certified declaration that there is sufficient capital available for the operation of a wholesale and a description of the amount and nature of such capital and particulars as regards the terms under which the capital is held or invested.
• A list of all storage facilities intended to be used.
• Final designs or construction drawings of buildings, roadworks, structures, and plant, including the location thereof, to be erected.
• A certified copy of an Environmental Clearance Certificate.
• A surveyor’s certificate of the area measure of the relevant premises with an indication of the position of the storage facilities on the premises.

Consumer Installation Certificate

Not everybody may apply for a consumer installation certificate. You may apply if you need a consumer installation for one of the following activities.

• A commercial or industrial undertaking (for example a transport business, a construction business, or any other business which relates to business or commerce).
• A farm where you are a bona fide farmer.
• A mining/petroleum exploration business.

An applicant must complete the prescribed form PP/5. The application form 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 corporate body;
• proof that the applicant operates a commercial or industrial undertaking or mine, or is a bona fide farmer;
• a certified copy of an Environmental Clearance Certificate; and
• signed declaration by a registered accountant or auditor that applicant has for a consecutive period of at least three months consumed more than 10,000 litres of petrol per month and that the 10,000 litres of petrol was obtained form the same supply point.

Used Mineral Oil Permit

The Regulations under the Petroleum Products Act address the transportation of refined petroleum, requiring permits only for the transportation, possession, and storage of used mineral oil.

The applicant must complete prescribed application form (Annexure A of the Regulations) and address a letter to the Executive Director of the Ministry of Mines and Energy (MME), wherein it must be stated the quantities, use, and intended importation dates.

Neither the Petroleum Act, the Petroleum Products Act and the Regulations make provision for the issuing of midstream licences.

The price Namibian consumers pay is based on the “Basic Fuel Price” of fuel which is landed and stored at Walvis Bay. On top of this price come the following additional levies:

• a common excise duty;
• a fuel tax;
• a levy charged by MVA and Road Safety Council;
• a Road User Charge; and
• a fuel to provide revenue to the National Energy Fund (NEF).

The Minister may, through regulation, set the price, or a range with maximum and minimum prices, at which petroleum products can be sold.

The Income Tax Act 24 of 1981, as amended, sets the corporate tax rate at 32%. It is important to note that the tax rate has been reduced to 31% effective 1 January 2024, with a further reduction to 30% taking effect on 1 January 2025. The Value Added Tax Act 10 of 2000 sets the VAT at 15%. A 10% withholding tax on all management, consulting, technical, and administrative services paid by a resident to a non-resident, subject to any double-taxation agreements. Fees paid to foreign directors and foreign entertainment are subject to a withholding tax of 25%.

Namcor’s subsidiary, Namcor Petroleum Trading and Distribution (Proprietary) Limited 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.

Moratorium on Issuance of Wholesale and Retail Licence

It is important to note that currently, there is a moratorium on the issuance of new retail licences by the Ministry of Mines and energy. However, the moratorium is not cast in stone and the Ministry of Mines and Energy makes exceptions to issue retail licences for far reaching rural areas. Regarding Wholesale Licenses, the Ministry of Mines and Energy recently announced that the moratorium on the issuing of Wholesale Licenses will be lifted effective 16 August 2024.

Powers of Inspectors/Controllers

Further important to note that inspectors/controllers are responsible to ensure that the Petroleum Products and Energy Act, 1990, and the regulations thereunder are complied with. An inspector/controller, when exercising his/her power, must show his/her certificate of appointment and provide a notice in the Form PP/12. If it is not possible to provide the notice immediately, the notice must be provided as soon as possible thereafter.

Change of Information/Amendment

If any information on a licence changes, the licence-holder must, prior to such change, apply to the Minister for an amendment of the licence by completing Form PP/9 and the appropriate fee of NAD100 must be paid. If the Minister finds out that some information on a licence has changed and the applicant failed to inform the Minister thereof, the Minister may effect such change. The licence-holder who may for whatever reason, including the closing down of the business or a change of premises, abandon the relevant premises, must give notice to the Minister at least one month before such abandonment. Once the Minister has received the notice, an inspector, or other competent person authorised thereto by the Minister, will inspect the premises to assess the status and see whether the premises have been sufficiently restored. If the inspector is satisfied, the inspector will issue a certificate of compliance in Form PP/7. No fee is payable.

A private investor constructing infrastructure does not have condemnation/eminent domain rights. Article 16 provides that only the State or a competent body or organ authorised by law may expropriate property in the public interest.

The Petroleum Products Act and the Regulations 2000 serve as primary legislation governing the transportation of petroleum products. In addition to the Petroleum Products Act, there are regulations which prescribe that any person transporting for re-sale, storage or transit of a petroleum product must ensure that the petroleum product is marked with the markers specified in the relevant forms attached to the regulations. Taking into consideration that petroleum products (Fuel and Diesel) is mostly conveyed via road and railway transportation in Namibia, it is also important to have due regard to the Road Traffic and Transportation Regulations as well as the relevant NAM/SANS standards relevant to the transportation of petroleum-based flammable liquids and dangerous goods.

Regarding inter- or intra-regional pipeline systems in Namibia, applicable consents must be obtained from affected landowners as well as the required construction and environmental permits needed for the implementation of such pipeline projects.

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

In terms of the Regulations 2000, no person may:

• operate a retail outlet or conduct the business of a wholesaler without being authorised to do so under a retail licence or a wholesale licence, respectively; or
• operate a consumer installation without being authorised under a certificate.

In terms of the Regulations relating to the purchase, sale, of used mineral oil, no reseller may have a larger quantity than 5,000 litres, and no bulk consumer may have a larger quantity than 2,000 litres of used mineral oil in his or her possession for a continuous period exceeding 30 days or for such longer period as authorised by a permit.

Non-compliance with these provisions may result in criminal sanctions.

Any persons who intends to import/export petroleum products into Namibia must obtain an import/export permit issued by the Ministry of Trade and Industry under the Import and Export Control Act 30 of 1994. The Ministry of Trade and Industry will only issue an import/export permit upon approval of such request by the Ministry of Mines and Energy in respect of petroleum products. The tariff codes for the specific products can be obtained from the relevant regulatory authority.

Export Levy and Customs and Excise

The Export Levy Act 2 of 2016 imposes an export levy on certain goods, with a 1.5% rate levied on unrefined crude oil of all types exported from Namibia. Refined oil of all types is subject to a zero rate. The importation of petroleum products is regulated by the Customs and Excise Act 20 of 1998, which allows for the imposition of levies at importation and certain rebates and refunds due to loss through evaporation.

A wholesale licence or certificate is non-transferable. A retail licence can only be transferred through an amendment of the licence. The Petroleum Products Act does not provide for the assignment of interests in retail and wholesale licences. No government approvals are 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 that influence the application of its domestic laws. Namibia has signed bilateral investment treaties with the Netherlands, Germany, Switzerland, Austria, Spain, Finland, France, and Malaysia. Article 144 of the Namibian Constitution states that the general rules of public international law and international agreements binding upon Namibia under the Constitution form part of the law of Namibia. It is important to note that Namibia has not yet ratified the 1958-adopted New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Expropriation of Property

Article 16(2) of the Namibian Constitution grants the legal authority for expropriation. This provision allows the state, or any legally authorised body or organisation, to expropriate property in the public interest, provided just compensation is paid.

Therefore, the prerequisites for expropriation include

• the expropriation must be authorised by law;
• serving the public interest;
• When government considers to expropriate, government must observe the principle of audi alterem partem, namely, afford the person the right to be heard on the issue; and
• just compensation.

Expropriation can be consensual or, if necessary, enforced. Forced expropriation is restricted to matters involving land rights.

Stabilisation Clauses

The government does not typically agree to stabilisation or economic rebalancing provisions in petroleum agreements. There are no statutory restrictions that prevent the government to agreeing to such terms except the cabinet resolution that states, “Economic Stabilisation Clauses should not form part of the Petroleum Agreement to be signed by the Minister of Mines and Energy and the Kudu Upstream Consortium”.

However, with Namibia moving from the exploration to development and production phase, the calls for economic rebalancing clauses in the petroleum sector are now growing and the authors soon expect the Ministry of Mines and Energy to consider the present reality and publicly pronounce itself on whether economic rebalancing provisions will be introduced in the petroleum sector.

Dispute Resolution Between Licence Holder and Government of the Republic of Namibia

Should the Minister and the licence-holder be unable to resolve a dispute through negotiation, either party has the option to refer the matter to arbitration for a definitive resolution. Any dispute that remains unresolved will be conclusively resolved by arbitration in accordance with the Arbitration Rules of the UN Commission on International Trade Law, effective on the date the agreement was executed. Unless otherwise agreed by the parties, the arbitration will typically be conducted in London, England. During the arbitration process, and to the extent feasible, the Minister and the company will continue to execute the terms of this agreement.

Administrative Action

At this stage, no right to appeal exist should the Minister refuse to grant a licence to an applicant. However, the Minister’s decision may be reviewable. If for any reason the Minister or Petroleum Commissioner refuses to grant an applicant an exploration licence or alternatively takes a decision which adversely affects a licence holder, an applicant/licence holder may request the Minister to furnish reasons on why such a decision was taken and may thereafter, after seeking sound legal advice, decide to approach the High Court of Namibia for a judicial review of the decision.

Namibia is a UN member state and has an obligation to comply with UN 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. The Financial Action Task Force requires Namibia to implement targeted financial sanctions regimes to ensure risk mitigation and thus compliance with the UNSC Resolutions relating to the prevention and suppression of Terrorism, weapons Proliferation and the financing thereof

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 and Its Regulations

Section 27 (2) of the Environmental Management Act 7 of 2007 read with the whole scheme of Environmental Impact Assessment Regulations GN 30/2012 (EIA Regulations No 30 of 2012) and Regulations GN 29/2012 prohibits any person from conducting any oil and gas exploration activities unless the person is a holder of an environmental clearance certificate.

The Department of Environmental Affairs (DEA) in the Ministry of Environment, Forestry and Tourism is the principal regulator of the EMA and its regulations. The Environmental Commissioner serves as head of the DEA. The Minister of Mines and Energy is the relevant competent authority in respect of mineral and petroleum exploration and production operations.

Process for Application of Environmental Clearance Certificate

Before proceeding with an application for an environmental clearance certificate, the proponent must verify whether the proposed activity falls under a listed activity category. Petroleum exploration activities, which include acquisition of seismic data and the drilling of wells are recognised as listed activities, requiring an environmental clearance certificate, before commencement of such projects.

In practice, a petroleum licence holder must procure the services of an experienced environmental consultants who is required to apply, on behalf of the Company, for an environmental clearance certificate in the prescribed form and manner and on payment of the prescribed fee, to the relevant competent authority for an environmental clearance certificate. The Ministry of Mines and Energy, as the competent authority, must forward to the Environmental Commissioner the application for the environmental clearance certificate on the prescribed form accompanied by the relevant documents as prescribed by the EIA Regulations No 30 of 2012.

Public Consultation Process

Applying for an ECC specifically requires an applicant (normally the proponent) to conduct public consultation. Below, the authors provide a summary of the public consultation process.

Notification

Proponent to give notification to interested and affected parties through the following.

• Fixing a notice board at the project site.
• Written notices to adjacent landowners, local authorities, and relevant state organs.
• Advertisement in at least two widely circulated newspapers in Namibia.

Content of notification

The notification must:

• give details of the application subject to consultation;
• give details of the nature and location of the proposed activity; and
• provide information on how an interested and affected party can obtain further information about the application and submit representations.

Consultation facilitation

The applicant must ensure all relevant information is available to interested and affected parties and the applicant must further ensure that he/she facilitates consultations to allow reasonable opportunity for stakeholders to comment on the application for environmental clearance certificate.

Timelines

Public consultation must be completed within 21 days for certain applications, including environmental clearance certificates and assessment reports. Comments must be submitted within 7 days of notification of an application or after having received access to a scoping report.

Register of interested and affected parties

The applicant must open and main a register of interested and affected parties. Applicant must record names and addresses of persons who submit comments or attend meetings as well as the names of all persons who have requested for their names to be included. The applicant must also include the names of all organs of state which have jurisdiction in respect of where the activity takes place.

Rights of registered parties

Registered parties can comment on all submissions made by the applicant to the environmental commissioner and are further entitled to access and comment on reports such as scoping and assessment reports before submission to the Environmental Commissioner.

Recording of comments

Comments from interested and affected parties must be recorded in reports submitted to the Environmental Commissioner.

The Regulations relating to the health, safety and welfare of persons employed, and protection of other persons, property, the environment and natural resources, in, at or in the vicinity of exploration and production areas No 190 of 1999 (1999 Regulations) regulates health and safety in respect of exploration and production activities. The regulations place a duty on the operator to ensure that good oilfield practices are in place when it comes to health and safety. The 1999 regulations are administered by the Ministry of Mines and Energy and are binding on all licence-holders. There are Health, Safety and Environmental Inspectors from the Ministry of Mines and Energy empowered to inspect and ensure that regulations and policies are adhered to by operators.

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, inter alia, a health and safety representative to be appointed. A petroleum licence holder must further obtain a Pollution Safety Certificate for the rig to be used. In addition, specific licence and approvals must be obtained for using goods classified as dangerous goods or using goods containing radioactive sources. The applicable permits and approvals as required by the Radiation Protection And Waste Disposal Regulations and Hazardous Substances Ordinance 14 of 1974 need to be applied for.

The Petroleum Act requires that an application for a production licence must include 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. These plans must satisfy the Minister of Mines and Energy, in consultation with the Ministers of Environment and Tourism, Fisheries and Marine Resources, and Finance, outlining measures to be implemented post-production to remove or manage all installations, equipment, pipelines, and other facilities, whether onshore or offshore, used during operations.

Review and Revision of the Decommissioning Plan

In terms of the Petroleum Amendment Act of 1998, one year before reaching the estimated date on when 50% of the recoverable petroleum reserves in the production area are expected to be produced, the holder of the production licence must review and, if needed, revise and update the decommissioning plan. The Minister may, in consultation with the Ministers of Environment, Forestry and Tourism, Fisheries and Marine Resources, and Finance, approve the revised decommissioning plan or request the licensee to make necessary amendments deemed necessary by the Minister.

Trust Fund

Before reaching the estimated date when 50% of the recoverable petroleum reserves in the production area would have been extracted, the holder of a production licence is required to establish a trust fund dedicated to decommissioning facilities.

Additionally, a separate trust fund must be set up for decommissioning facilities located outside the production area if they are used in connection with the production operations. The decommissioning trust funds are exempt from all taxes, except those stipulated under the Petroleum Taxation Act.

The licence holder is obligated to cover the entire decommissioning costs as per decommissioning plan, even if there is a shortfall between the total 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.

Section 16 of the Petroleum Act provides that a petroleum licence holder cannot exercise their rights under the licence in, on, or beneath any town or village, land designated as a public road, aerodrome, harbour, railway or cemetery, or land reserved for any government or public use, without the approval of the Environmental Commissioner, subject to conditions specified in the notice.

The licence holder must obtain written permission from the landowner or the owner of the works before exercising any rights granted by the Petroleum Act or the terms of the petroleum licence in, on, or under any land:

• used as a garden, orchard, vineyard, nursery, plantation, or other cultivated land;
• within 100 metres of any spring, well, borehole, reservoir, dam, dipping tank, waterworks, perennial stream, artificially constructed watercourse, kraal, building, or any structure of whatever nature;
• within 300 metres from any point on the nearest boundary of any/every piece of land in an approved township (“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.

Further, if the land upon which the licence holder seeks to conduct exploration activities is owned by the local authority, the local authority council shall, before any immovable property is sold, disposed of, or let, hypothecated or otherwise encumbered, whether by way of tender or private transaction, first consult the Minister of Urban and Rural Development on its intention to so sell, dispose of or let, hypothecate or otherwise encumber such property.

Similarly, if the land upon which the licence holder seeks to conduct exploration activities is state land (communal land), the licence holder must first obtain consent from the traditional authority or the person having a right over the land. Failure to obtain consent from local authority or traditional authority may limit development for a certain period of time. If the local authority or traditional authority has unreasonable demands, the matter can be referred to the ancillary rights commission who have the right to grant consent for development to proceed.

Namibia has been proactive in promoting renewable energy through various policies and programmes. Namibia became a signatory of the Paris Agreement on Climate Change in New York, on 22 April 2016. Other than the international instruments, there are no major specific laws that are focused on energy transition in Namibia at this stage. In terms of policies, the National Energy Policy and the National Renewable Energy Policy emphasises the development of renewable energy to enhance energy security and sustainability. It sets targets for increasing the share of renewable energy from the available diverse energy sources

In respect of projects, Namibia has ambitious plans to increase its reliance on renewable energy sources, including solar power. The Renewable Energy Feed-In Tariff (REFIT) programme, for instance, encourages independent power producers to generate electricity from renewable sources like solar and wind. Namibia’s Green Hydrogen Council launched Namibia’s Green Hydrogen Strategy at COP27 in Sharm El-Sheikh, Egypt in November 2022. It aims to position the country as a global leader in green hydrogen production.

Namibia has a nascent oil & gas industry. There are no specific oil and gas assets that are being used for energy transition projects.

The Energy Transition’s Affect Over “Traditional” Oil and Gas Development in Namibia

The Minister of Mines and Energy has on numerous occasions emphasised that it is Namibia’s intention to harness its fossil fuel resources, including natural gas, for its domestic, regional and continental needs and that Namibia will be harnessing its oil & gas resources while at the same time also building a thriving renewable energy industry that will help with climate change.

Since 2021, drilling activities have been ramping up in Namibia, with a total of 17 wells drilled. In addition, Total Energies allocated about NAD5.7 billion for exploration and appraisal work in the country’s budding oil sector. In June 2023, Upstream online reported Namibia accounted for about 13% of all offshore rigs operating in Africa. Thus, at this stage, there is no serious negative impact that energy transition is having on upstream development and investment in Namibia. The Minister of Mines and Energy was reported stating that the economic and social benefits derived from fossil fuels is still crucial for Namibia. It is however important to note that generally, financing for oil and gas projects in Africa will be affected by the energy transition.

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.

Discoveries

On 4 February 2022, Shell Namibia Upstream BV, alongside its JV partners Qatar Energy, and NAMCOR announced that it had made a discovery of light oil in both primary and secondary on the Graff-1 prospect located in Block 2913A, PEL 39.

On 24 February 2022, TotalEnergies, alongside Qatar Energy, Impact Oil and Gas and NAMCOR also announced that they had made a significant discovery of light oil with associated gas on the Venus-1X prospect, located in Block 2913B, PEL 56 in the Orange Basin, offshore southern Namibia.

Further multiple discoveries were announced by Shell and the JV Partners in April 2022 in the La Rona-1 prospect, in March 2023 in the Jonker-1X, and in July 2023 in the Lesedi-1X prospect.

A further significant discovery was announced by Galp Energia on 11 January 2024 in the Mopane-1X well in block 2813A, PEL83, offshore Namibia.

It has also been reported in February 2024 that the Total Energies Mangetti-1X probe in Block 2913B PEL 56 hit oil, possibly in two reservoirs. Shell and partners again confirmed the presence of oil deposits at the Enigma-1X well, located at PEL 39 offshore Namibia in April 2024.

Onshore Land Tenure System

Onshore exploration normally creates a scenario where there is a clash of rights, especially as it pertains to surface rights. It is, therefore, important to understand Namibia’s land tenure system. Surface rights/title to land can normally be acquired through lease or outright purchase depending on the land tenure system. Land tenure in Namibia was – and continues – to be characterised by two broad tenure systems. About 44% of the land area is owned under registered freehold titles and is commonly referred to as the Agricultural Land. Another 41% consists of land that is administered under various customary governance systems where use rights to land are allocated to persons typically for life and is commonly referred to as Communal Land. In addition to the land title falling under the Agricultural Land and Communal Land, there is also land within local authority commonly referred to as Urban Land (township) which falls under the purview of the local government, which consists of villages, towns, and municipalities.

On 18 September 2023, the Ministry of Mines and Energy invited interested consultants with the necessary skills and expertise to submit a Request for Proposal to conduct a comprehensive peer Review of the current work done on the petroleum legislative framework (Petroleum Exploration and Production Act of 1991 and its amendments; Petroleum Safety Regulations of 1998; Petroleum Taxation Act of 1991; Model Petroleum Agreement; and Petroleum Products and Energy Act of 1990 and its regulations) and for the consultants to further propose any necessary amendments. The process by the Ministry of Mines and Energy to appoint a consultant to peer review and analyse the petroleum legislative framework is still ongoing.