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 is 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, 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:
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 his or her request and in the exercise of his or her 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 also published in 1998 and updated in 2007.
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.
There are no provisions under the Petroleum Act that provide for the expropriation of an interest in a licence. Licences can, however, be cancelled under certain conditions.
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.
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 photogeological surveys. They include remote-sensing techniques. Application for a reconnaissance licence or the renewal of a reconnaissance licence must be made in the prescribed manner. 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.
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.
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. 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 the petroleum of 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.
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.
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. 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 the 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 the 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. 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.
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 the holder of a licence, 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 applicant must demonstrate the technical and financial capacity to perform the minimum work commitments proposed and to cover the minimum expenditure to be incurred.
Royalties are charged according to the terms of the Petroleum Act. They are payable quarterly on or before the last day of each month following each quarter. The rate at which royalties are charged depends on the licensing round during which the licence was issued. Royalty on licences issued during the first and second licensing rounds is charged at a rate of 12.5% of market value (determined as provided for in 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 as provided for in 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 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 licence area. Each licence area is assessed separately and losses in one area cannot be set off 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.
The other tax laws that apply to the oil industry are as follows:
The Ministry of Finance (through the permanent secretary) is the government body exercising 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 carried subject to such terms as may be agreed among 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 the 10% Namcor participating interest allocation).
Furthermore, it is a standard term and condition of a petroleum licence that the person to whom the licence has been issued will:
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 has been 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 forthwith in order to appraise the discovery and determine the quantity of petroleum to which the discovery relates, insofar 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.
See 2.1 Forms of Allowed Private Investment in Upstream Interests.
In addition, it 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:
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 wants to be joined as 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 be joined as 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 on whatever terms and conditions as he or she 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 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 purposes 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 fine and imprisonment.
See 3.3 Issuing Downstream Licences.
No national monopoly exists in Namibia. It should, however, be mentioned that Namcor has approached the Namibia Competition Commission for approval of the implementation of a mandate that will empower it to exclusively source 50% of Namibia’s annual fuel needs. The outcome of this process is pending.
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 certificate may, in accordance with the Regulations, be granted and issued on application to the Minister:
An application for a retail licence must be accompanied by:
An application for a wholesale licence must be accompanied by:
An application for a consumer installation certificate must be accompanied by:
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 being applicable to the selling price thereof. 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 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:
This Act also provides for the establishment and utilisation of the National Energy Fund and for the establishment and functions of the National Energy Council. Finally, the 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 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, 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 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 downstream licences.
There are no statutory local content requirements applicable to downstream operations by private investors.
A number of general conditions apply to all wholesale licences. These include:
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:
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 prior to the intended date of closure, change or abandonment. 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 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 associated infrastructure.
In terms of the Regulations, no person shall:
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.
No provision is made for cross-border sales and deliveries of crude oil or crude oil products under the Petroleum (Exploration and Production) 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 between the licence-holder and the Minister of Mines and Energy arising 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 and Energy Act 13 of 1990 deal with the transportation of refined petroleum. These 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 Act also deal with the transport of oil. These regulations deal with transport facilities and the transport, storage and use of hazardous substances.
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 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 will 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.
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 shall first be resolved amicably by negotiations.
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 the arbitration.
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. It 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/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 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 or not 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, 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 he or she believes may be of significance to the 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. The "report" here 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, inter alia, a health and safety representative to 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 (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 purposes of the operations, and to rehabilitate land disturbed by way of the operations. It must include:
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.
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 the facilities in any area outside the production area where facilities are used in connection with the production operations of the holder of the production licence in question. The decommissioning trust funds are exempted 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.
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 is proposed 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:
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 the 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 particular case.
There are no special schemes, laws or regulations relating to unconventional upstream interest in Namibia under the Petroleum Act.
No special scheme relating to LNG projects is in place under the Petroleum Act.
There may be difficulty in seeking enforcement of judgments or awards against the government. Under Section 2 of the Crown Liabilities Act 10 of 1910, which is still in force in Namibia, a court must recognise any claim against the government if the claim in question would ordinarily be recognised if instituted against another person. The minister of the department involved will be the nominal defendant or respondent if the government is sued. The liability of the state extends to vicarious liability for the actions of public servants in the government’s employ, where the servant in question acts in their capacity as public servant and within the scope of their authority as such. Section 4 of the Crown Liabilities Act, however, provides that no execution or attachment or process in the nature thereof shall be issued against the nominal defendant or respondent, nor against the property of the government, but the nominal defendant or respondent may cause such sum of money as may, by judgment or order of the court, be awarded to the plaintiff, applicant or petitioner, as the case may be, to be paid out of the State Revenue Fund.
The entire Crown Liabilities Act in Namibia is still in force. Thus, while the government can enter into any agreement and while the courts will recognise those agreements, a court order based on the agreement will not be enforceable.
Namibia is not a signatory to the New York Convention and the provisions of Section 4 of the Crown Liabilities Act may not withstand constitutional scrutiny, meaning that this Act is outdated and needs legislative reform.
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 to the proposed amendments and regulations and is at present awaiting the MME’s feedback. The consultative process is yet to be finalised.
The Republic of Namibia is also known as the Land of the Brave, and is a largely unexplored frontier that has recently attracted interest from major and medium-sized oil companies. To date, 24 explorations and appraisal wells have been drilled offshore Namibia, 18 of which are exploration wells and six are appraisal wells within the Kudu Gas Field.
Kudu Gas Field
The only commercial discovery in Namibia is the Kudu Gas Field, which was discovered in 1974 by a joint venture comprising Chevron Oil, Regent Petroleum and SOEKOR (Pty) Ltd. It lies approximately 170 km west of Orangemund, offshore Namibia, in a water depth of 170 metres. The field’s proven natural gas reserves are estimated at 1.3 trillion cubic feet and possible reserves at 9 trillion cubic feet. The upstream partners in the Kudu Gas Field, Block 2814A are the National Petroleum Corporation of Namibia (NAMCOR) with 44% and BW Offshore with 56% as the operator. The initial development plan for the field was a gas-to-power project, with Namibia Power Corporation (NAMPOWER) as the downstream partner. The gas produced from the Kudu Gas Field was to be transported through a 170 km pipeline to a power station, which was supposed to be built approximately 25 km north of Orangemund in the southern part of Namibia. However, the initial development plan failed due to the non-fulfilment of some conditions in the Project Development Plan (PDA) signed by the upstream partners and the downstream partner. In terms of the Project Schedule set out in the Annexures of said PDA, the Government of the Republic of Namibia was supposed to provide the required project support, including economic stabilisation provisions and financial guarantees.
However, in November 2018 and January 2019, the Government of the Republic made it clear that it was not going to provide the required support in terms of the PDA. As a result, the downstream partner, NAMPOWER, indicated that it would withdraw from the PDA and not continue to be part of the Kudu Gas Project. This means that the upstream partners will have to come up with another development plan that does not require any support from the Government of Namibia. It is believed that the upstream partners are currently engaged in working out a new development plan for the project.
Walvis Bay Oil Storage Facility
In 2015 the Government of the Republic of Namibia commissioned the construction of National Oil Storage Facilities and a Maritime Platform for Oil Offloading at the Port of Walvis Bay, Namibia. The oil storage facility consists of offshore and onshore operations, a 6.5 km pipeline and a tank farm. Fuel and oil will be transported from tanker ships to the storage tanks via the pipeline. Once completed, the facility will have a total capacity of 75 million litres, and will be able to store various grades of diesel, as well as unleaded petrol, heavy fuel oil and aviation fuel. Upon its completion, the oil storage capacity of the country will be increased from 14 days to about 30 days. Construction of the facility is currently 99% completed.
In October 2018, the Namibian Cabinet gave NAMCOR approval to be the operator of the facility (offloading facility, pipeline and tank farm) on behalf of the Government of Namibia, while the Namibia Ports Authority (NAMPORT) was authorised to be the operator of the offshore marine elements of the facility. The Namibian Cabinet directed the Ministry of Mines and Energy, Namibia to enter into agreements with NAMCOR and NAMPORT to regulate the operations and sharing of the facility. The Namibian Cabinet further approved that NAMCOR – in consultation with the Ministry of Mines and Energy, Namibia – should procure a Technical Partner to assist with the operation of the facility, with a specific mandate to equip NAMCOR employees with the requisite technical skills and capacity for a period of two to three years. NAMCOR was further given the greenlight – albeit in consultation with the Ministry of Mines and Energy, Namibia – to offer tank farm hosting services on market-related terms to any Fuel Wholesale Licence holders for excess tank farm capacity, and all hosting agreements should be approved by the Treasury and the Office of the Attorney-General. This process is believed to be at an advanced stage, as some oil companies with wholesale licences have been shortlisted for approval. It is believed that the facility might be operational by March 2021.
Intended Reforms to Petroleum Legal Regime
In 2017, the Ministry of Mines and Energy, Namibia commenced an exercise to reform Namibia’s downstream and upstream petroleum legal framework through the Commonwealth Secretariat’s Oceans and Natural Resources Advisory Division (ONR), with the assistance of some private consultants.
Upstream legal framework
The Petroleum (Exploration & Production) Act of 1991 will be amended and consolidate all current amendments into a single document. The Petroleum Taxation Act of 1991 will also be amended. There are intended amendments to the Petroleum Regulations, and additional draft subsidiary legislation to be prescribed under the Petroleum (Exploration & Production) Act of 1991 is being prepared. The current Model Petroleum Agreement implemented in 2007 will also be amended, and a local content legal framework is being mooted. The intended reform will also look at clarification of the regime for the governance of environmental matters for petroleum operations and the possible preparation of draft subsidiary environmental legislation for the upstream sector. The pertinent intended amendments include the following:
Downstream legal framework
The Petroleum Products and Energy Act of 1990 will be amended and consolidate all current amendments into a single document. The Petroleum Products Regulations will also be amended, and existing amendments will be consolidated.
The Ministry of Mines and Energy, Namibia has already consulted the petroleum industry regarding the intended reforms. Both the upstream and downstream stakeholders/industry players have submitted their input for consideration. The intended reforms to the petroleum legal regime are expected to be completed in the second half of 2021.
Major Oil Companies Flocking to Namibia
Namibia’s geology is said to be similar to Brazil’s offshore pre-salt, while the onshore is similar to the massive South African Karoo Basin; coupled with a stable fiscal and legal regime, this has resulted in a number of major oil companies acquiring acreage in Namibia over the past two years. In 2019, ExxonMobil expanded its exploration acreage in Namibia by acquiring another 7 million net acres (28,000 square km) to its offshore holdings, with water depths reaching 4,000 m following the signing of an agreement with the government of Namibia and NAMCOR for blocks 1710 and 1810, and farm-in agreements with NAMCOR for blocks 1711 and 1811A. ExxonMobil is the operator of blocks 1710 and 1810 and holds a 90% interest, while NAMCOR holds a 10% interest, with the remaining 5% interest being held by a local Namibian company. ExxonMobil is also the operator of blocks 1711 and 1811A, and holds an 85% interest, while NAMCOR holds the remaining 15% interest. ExxonMobil also holds a 40% interest in blocks 2112B and 2212A offshore Namibia, comprising about 2.8 million gross acres (11,500 sq km).
In 2017, Total farmed into block 2913B offshore Namibia and became the operator. Total also acquired block 2912 in 2018, becoming the operator as well.
Shell operates blocks 2913A and 2914B offshore Namibia and is in advanced plans to drill. Qatar Petroleum has also farmed in blocks 2913B and 2912, both of which are operated by Total. With most major oil companies having acquired acreage in Namibia, it appears it is just a matter of time before a big oil discovery is made.
Upcoming Wells to be Drilled in Namibia
Total has already secured a rig to drill a well in Namibia’s Block 2913B. Total is the operator of the petroleum block, with a 40% interest; the other joint venture partners are Qatar Petroleum with a 30% interest, Impact Oil and Gas Limited with a 20% interest and NAMCOR with a 10% interest. Drilling is expected in the fourth quarter of 2020 or the first quarter of 2021.
London-based oil and gas company Reconnaissance Energy Africa is also expected to drill in Namibia’s Kavango basin’s Blocks 1819 and 1820. Reconnaissance Energy Africa is the operator of the block and has a 90% interest, while NAMCOR has a 10% interest. Drilling is expected in the first or second quarter of 2021.
Lastly, French-based oil and gas company Maurel & Prom and its joint venture partners are expected to drill Namibia’s blocks 2212B, 2313 and 2413B in the first or second quarter of 2021. Maurel & Prom is the operator of the block and has a 42.5% interest; the other joint venture partners are AziNam with a 42.5% interest, NAMCOR with an 8% interest, Livingstone Mining Resource Development with a 4% interest and Frontier Mineral Resources with a 3% interest.
These are indeed exciting times for Namibia’s oil and gas industry, with more activities expected next year when the price of oil has stabilised.