Windhoek - The hydrocarbon sector is poised to become the leading driver of foreign direct investment (FDI) inflows into Namibia. The recent discovery of light oil in the Jonker-1X well in the Orange Basin marks the third significant find in the region over the past year by major international oil companies like Shell, QatarEnergy and NAMCOR. These discoveries prove the immense potential of Namibia’s deepwater oil and natural gas resources.
Consequently, Namibia’s oil and gas industry is expected to attract substantial foreign investment, fueling the growth of the Namibian economy. QatarEnergy, for example, holds interests in three exploration licenses covering over 28,000 km2 in the Orange Basin – PEL-39 (45%), PEL-56 (30%) and PEL-91 (28.33%). Following the Jonker-1X discovery, QatarEnergy signed a Memorandum of Understanding (MoU) with Namibia’s Ministry of Energy and Mines to enhance cooperation through knowledge-sharing, workforce development and upstream investment. The MoU demonstrates QatarEnergy’s enthusiasm to expand operations further in Namibia.
Namibia has also signed agreements with Angola and Zambia to pave the way for direct collaboration in the oil and gas sector. These deals signal the burgeoning investment opportunities in Namibia’s nascent hydrocarbon industry. While foreign direct investment flows into the Namibian economy are escalating overall, FDI into the oil and gas sector surged to $338 million in the second quarter of last year due to an influx of equity capital for exploration activities. Total FDI stock ($6.3 billion) currently accounts for over half of Namibia’s GDP. Presently, the mining industry remains Namibia’s largest draw of FDI inflows, responsible for driving the country’s post-pandemic recovery, with diamond production alone increasing by 46% in 2022. China has invested heavily into Namibian mining, particularly in uranium. However, the Jonker-1X, Venus-1X and Graff-1X discoveries reflect mounting foreign investment into Namibia’s hydrocarbons sector, which could supplant mining as the country’s most attractive industry.
Business-friendly policies will be critical to ensuring development across Namibia’s energy sector at-large. Green hydrogen, solar and wind projects are expected to be funded and actualized through foreign investment secured through hydrocarbons and the reinvestment of earnings by some IOCs into other sectors – and will benefit from infrastructure works currently being carried out. The World Bank, for example, is already preparing a Transmission Expansion and Energy Storage Project in Namibia, which will increase uptake capacity and strengthen the transmission network in preparation for the anticipated generation capacity increases promised by renewable energy projects.
Existing FDI is governed under the Foreign Investment Act of 1990 and is the foundation for Namibia’s attractive investment environment. It outlines the equal treatment of foreign and domestic firms, expropriation compensation and steps for international dispute arbitration. It also establishes the right of international firms to remit profits and guarantees their foreign exchange access. More recent policies aimed at attracting new FDI include the Namibia Investment Promotion Act (2016), which further protects investor rights, and a series of existing tax incentives that may be made newly available to additional industries across Namibia’s energy sector. As the latest offshore oil discoveries progress towards large-scale development, Namibia is well-positioned to attract significant FDI flows to its nascent energy sector, triggering growth across its national economy.
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