Lawyer calls for bidding system in Namibia’s petroleum sector

Shakwa Nyambe

Namibia has been urged to introduce a licence bidding system in the country’s nascent petroleum sector to enhance transparency and accountability in the licensing process.

This was said by Shakwa Nyambe, the managing partner of Windhoek law firm SNC Incorporated, during a presentation to international leaders and industry professionals at the Africa Energies Summit 2024 in London from 14 to 16 May.

The lawyer emphasised in his presentation, titled ‘Namibia: Africa’s New Oil and Gas Frontier; a Scrutiny of the Business and Legal Aspects’, that these bids would involve periodic and publicly announced opportunities for companies to tender for petroleum licences.

“This system allows the government to assess the financial and technical capabilities of potential investors, ensuring that only qualified and capable entities are granted licences.

“The process can be highly structured and regulated, with clear criteria and timelines, making it more difficult for unethical practices,” he said.

Allegations of favouritism in the issuing of petroleum prospecting licences by top officials in the Ministry of Mines and Energy were made recently.

Energy minister Tom Alweendo in March denied allegations that he had corruptly awarded a petroleum licence to a close friend.

According to Nyambe, Namibia could consider maintaining the open licensing system for some domains.

“This system allows companies to apply for licences at any time, instead of waiting for specific bid rounds. This flexibility could attract continuous investment and also benefit areas that may not attract significant interest during structured bid rounds,” he said.

Nyambe urged the establishment of an independent regulator for the upstream oil and gas sector to ensure impartiality and transparency in decision-making processes, thereby reducing the potential for conflicts of interest or direct political interference.

The regulator would oversee the licensing and permitting process for oil and gas exploration and production activities.

These would include evaluating applications, setting criteria for qualification and granting licences.

In his presentation, Nyambe, who is also the regional leader of the Frontier Energy Network Sub-Saharan Africa, explored Namibia’s evolving energy mix and examined recent significant deals within the petroleum sector.

He said Namibia can use all forms of an energy mix as set out in its national policy of 2007 to promote the efficient use and security of all relevant energy supplies, and to incentivise the discovery, development and productive use of the country’s diverse energy resources.

He highlighted the ongoing reviews of Namibia’s petroleum legal framework, which are necessary for creating a conducive environment for investment and growth in the energy sector.

Nyambe explained the Petroleum Exploration and Production regulations being considered, which will cover development plans, work programmes, drilling operations and surveys.

Namibia’s first oil production is expected around 2030.

Nyambe highlighted that the Petroleum Act, in its current form, does not have specific provisions for the development of natural gas fields.

This is more definitively covered in the Model Petroleum Agreement, he said.

“The model Petroleum Agreement also ought to undergo reviews and amendments, however, it would be beneficial to legislate some of the provisions for the development of gas fields rather than leave these to be fully negotiated under a contractual regime,” he said.

Nyambe stressed the need to include stabilisation clauses in the Petroleum Agreement to increase investor confidence.

He said Namibia’s local content requirements in the oil sector need the support of a clear and stable regulatory framework.
The framework needs to follow and consider the best practices in the industry and deal with potential risks, he said.

It should also look at expropriation and consider the interests of different stakeholders, such as indigenous groups, local communities and local governments.

“An effective legal and regulatory framework will also ensure a competent independent authority is established with public powers to provide oversight, regulate the industry and implement government policy,” he said.

Nyambe also detailed the tax obligations and considerations that come with operating in Namibia’s energy sector, employment and labour issues, such as basic conditions of employment, ordinary working hours and the rights and duties of employers and employees.
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