Oil Exploration in Namibia

FOR over a century, Namibia has had a g mineral foundation, starting with the discovery of diamonds in 1908. In the years thereafter, it has developed into the fourth largest exporter of non fuel minerals in Africa today.

This is led by its diamond production, which is the sixth largest in the world by value, uranium production, which is the fifth largest in the world, as well as production of gold, lead, zinc, tin, silver and tungsten.

Adding to the known on-shore and offshore resources to which Namibia’s economy is largely pinned, is the possibility of oil reserves. For a number of years there has been interest and activity in prospecting for hydrocarbons, both on and offshore, in Namibian territory. The first prospect wells were drilled in the early 1960s and following a number of dry wells, the Kudu gas fields were discovered in 1974, confirming the presence of hydrocarbons in the geological structures off the Namibian coast. The presence of hydrocarbons further motivated companies to explore coal and oil prospects in the country. However, after 36 coal exploration wells produced negative results and several oil exploration wells were found to be dry, interest in Namibia as an oil frontier waned.

In recent years, however, oil exploration in Namibia has once again started to garner a large amount of international interest due to the continuous rise in the price of oil together with improvements in offshore drilling technology. Large oil companies such as Shell, BP and Repsol have all bought exploration licenses in Namibia, and with that, a major rebound in deep-water drilling has been seen.

NAMIBIA AND BRAZIL

The interest in offshore Namibian oil stems from the fact that Namibia and Brazil were once connected as one continent and that the geographical formations in Namibia’s offshore basins are similar to those of Brazil, as well as the fact that Namibia borders a major oil producer in Angola, both of which have known oil reserves of a sizable magnitude.

With the invention of new deep-water technology, Namibia has seen over 13 wells drilled since the start of 2010. Temporary excitement was sparked by an announcement by the Minister of Mines and Energy as to an oil find in 2011, however the announcement turned out to be made in confusion, and the promising Kabeljou prospect well was found to be dry.

Last year, however, a potentially game changing discovery was made when oil was extracted from the Wingat-1 prospect well in the Walvis Basin, confirming the previous speculation as to oil-bearing structures off the Namibian coast.

Deep-water drilling costs at least US$70 million per well, with no guarantee of success. In addition, many wells around the world are being drilled to depths of more than 5 000 metres, significantly deeper than any Namibian drilling projects. Oil majors are more likely to risk these levels of capital and use aanced technology to further test Namibia’s oil prospects.

Despite the rising interest, no projects to date in Namibia have found oil in commercial quantities. Skepticism from investors has led the stocks of oil exploration companies that are active in Namibia such as Chariot and HRT to drop immensely in the past two years.

CIRCUMSPECT

While many Namibians still eagerly anticipate an oil discovery, others are more circumspect. Oil discoveries, particularly in developing countries, have not always yielded positive results for the people. In many instances, the majority actually end up losing out, while the minority become exorbitantly wealthy. Moreover, competition for control of resources has been known to lead to bloody and pervasive conflict in many developing nations.

Another concern is the environmental impacts of oil exploration. Hydraulic fracturing, a popular method of extracting oil and gas, has been receiving criticism for its environmental harm. It has been shown to pollute the water and air, and possibly trigger earthquakes. In general, a trend towards renewable sources of energy such as solar and wind power is increasing in popularity and viability due to new, cheaper technology. Thus, to many, it is debatable as to whether Namibia should focus on oil exploration instead of developing its solar and wind energy infrastructure.

Despite the hype surrounding the possibility of oil off the Namibian coast, a viable find remains elusive, with the only discovery to date being nothing more than an appetite whetter for exploration companies and prospect licence holders.

Nevertheless, exploration continues, and with the arrival of oil majors and many upcoming drilling projects, we will begin to see a more clear picture of Namibia’s oil potential, and should oil be discovered, only time will tell if it will help or hamper Namibia’s development.

Source : The Namibian