Last week on Friday, 4 February 2022, Shell announced that it had discovered light oil off the coast of Namibia, in a first for the southern African country.
Shell discovered 11 billion barrels of oil at the Graff-1 well, which was drilled to a total depth of 5 376 metres in water depths of approximately 2 000 metres.
Shell operates the block with a 45% stake while QatarEnergy and National Petroleum Corporation of Namibia (Namcor) hold a 45% and 10% interest respectively.
This week, The African Energy Chamber (www.EnergyChamber.org) spoke to Frank Fannon, former United States Assistant Secretary of State for Energy Resources and current Managing Director of Fannon Global Advisors, about the significance of Namibia’s oil discovery.
Fannon was the recipient of the 2021 AEC Lifetime Achievement Award during African Energy Week in Cape Town for his strong support of the African Energy Sector and Making Energy Poverty History.
What are your thoughts on this discovery and what will it mean for the country’s energy sector?
This discovery is a game-changer for the country – Namibia’s first oil discovery.
Namibia has had 40 plus years of uneconomic or dry holes since the Kudu gas field discovery in 1974.
Shell’s Graff-1 confirms to the global industry that Namibia has the resources to attract the world’s best and brightest.
What advice would you give to Namibia on how to handle the exploration and production of the discovery?
The world, investors, and the broader industries are watching how Namibia manages this discovery.
With a discovery of this potential significance, there are often political voices that would like to start spending money and accelerate timelines or cut corners to meet political rather than business cycles.
I would encourage the country to stay on a disciplined path. To focus on the technical elements, safety, and environmental performance, among others.
The world, investors, and the broader industries are watching how Namibia manages this discovery. It will be important that the country and the private sector execute the plan.
What should be done from a regulatory point of view to develop an oil and gas bill?
Namibia’s lack of discovery success in the past has meant that it could watch the rest of the world test different models.
I would encourage the country to integrate the best elements and reject the bits that compromise the country’s values. We know that Namibia wants to increase foreign investment. Identify and integrate those factors into legislation.
The country would also like to ensure a long-term industry. The regulatory context and fiscal regime should incentivize those goals rather than short-term returns.
Further, since resource projects – oil, gas, mining – are long-term investments, all market participants should expect certainty in decision-making.
What will the discovery mean for local content?
It is appropriate to encourage local content, especially where that content can add real value to the enterprise.
In practice, the best application of local content is when there is clear alignment between the local business or workforce and the project.
At the discovery stage, there is likely little opportunity for local content since there is still more of a design phase.
However, I would expect that there would be more opportunity for local content as the onshore services will be required when the project advances.
I would think that there may be some initial training opportunities for local businesses and education to explore what those future win-win situations may be in the near to mid-term.
How does this discovery work in the face of energy transition and what is the environmental impact?
High oil and gas prices have underscored that we will need oil and natural gas for many years into the future.
The transition away from oil will take many decades, and it will be uneven with certain regions able to transition sooner than others.
Yet, increasing calls to address climate change and transition away from hydrocarbons are very real.
The market, investors, shareholders, and the public more broadly, will increasingly demand that those hydrocarbons be produced safely and environmentally sustainable.
I suspect that concepts align with most Namibians, particularly given the importance of tourism.
It will be important for Namibia or any other project in the world to demonstrate that it is operating with the environment in mind and with the highest standards.
*Compiled and distributed by The Bulrushes’ partners, APO Group on behalf of the African Energy Chamber.
