The oil hype was too high – !Gawaxab

Bank of Namibia governor Johannes !Gawaxab says the country should lower its expectations when it comes to the oil industry.

!Gawaxab, speaking during the repo rate announcements on Wednesday, said until a final investment decision (FID) is made, it will be premature for the country to even include those numbers in its economic growth projections.

“What we need to do is lower our expectations. I think the hype was too high,” he said.

According to !Gawaxab, the central bank is waiting for a FID before including potential oil revenue in its economic growth projections.

“We have not accounted for or taken into consideration oil in the 2025 growth projections. It will be premature for us to include that into our numbers,” he said.

The bank has projected that the country’s economic growth will pick up again in 2025, from 3.5% to 4%.

However, !Gawaxab said the country remains an attractive investment destination, despite the recent oil write-offs.

He added that exploration does not automatically equal oil finds. There is always a chance that the companies will not find oil.

“When you do oil exploration, you never know, it’s a high risk game. It’s just exploration. However, Namibia remains an attractive investment destination because it offers what investors are looking for. Namibia has peace and political stability,” said !Gawaxab.

Additionally, the central bank said it has been working to better understand the sector.

“At the Bank of Namibia, we are building capacity to understand the industry, in terms of what is commercially viable and what is not,” said !Gawaxab.

Shell recently wrote-off US$400 million on one of its wells in the Orange Basin.

Over the last three years, Shell and its partners have drilled nine wells across the petroleum exploration licence (PEL39).

The wells are made up of six exploration and three appraisal wells, which is more than in any other exploration block in Namibia.

Currently, about 32 oil blocks in the country are under exploration.