Promising recent resource finds in Mozambique and Namibia as well as Cote d’Ivoire, Uganda and Tanzania – bode well for Africa’s future.

CAPE TOWN, Sept. 20 — Liquified Natural Gas (LNG) offers a unique energy opportunity for Africa, writes Niall Kramer, former Shell and Chevron executive and ex-CEO of the SA Oil & Gas Alliance. It comes at a lower environmental cost than oil or coal – and it could drive an enormous resource boom.

Promising recent resource finds in Mozambique and Namibia – as well as Cote d’Ivoire, Uganda and Tanzania – bode well for Africa’s future. Exploration is being pursued with renewed vigour, and the world’s energy companies are eyeing the continent with keen interest.

The potential for liquefied natural gas is especially attractive – as new liquefaction and regasification technologies have made LNG a competitive means of energy distribution. The recent finds also offer the promise of an LNG boom that could change the fortunes of many African nations, while also meeting their people’s energy needs – at a lower environmental cost than other hydrocarbons.

The key is unlocking these opportunities and providing the policy framework to enable them.

For South Africa, refining the Upstream Petroleum Resources Development Bill into a commercially competitive and certain Act would be a great step towards enabling these opportunities.

After that, another clear solution would be partnering with A-list international investing explorers, who come with their own balance sheets, skills, experience, and repetitional exposure to do the job.

Even while partnering with foreign organisations, SA can retain control of our resource wealth through the way we negotiate licence terms of (free) carry, tax rates, development commitments, tenure, skills readiness and harmonised regulations.

SA skills shortage

Such partnerships would present an opportunity to grow South Africa’s skills base in the oil and gas sector. Public-private partnerships are a good way for South Africans to gain international qualifications. Trainees could be reskilled miners, artisans, and technicians in a declining industry or a younger tranche.

If we manage to attract A-list explorers, we can get some holes in the ground, drill for data and then make empirical, evidence-based decisions on future production viability.

Mozambique is an example of what can be achieved by partnering with international energy firms to unlock domestic resource potential. Our eastern neighbour is about to export Eni’s first offshore-platform cargoes, and the Cabo Delgado Total onshore plant operation in Afungi looks set to restart.

Billions have been invested, and analysts are predicting that Namibia will become the next big oil and gas player on the global scene.

A recent discovery in the offshore Orange Basin of Namibia’s west coast will likely also yield billions for Namibia. Both Shell and Total’s consortia have massive Namibia finds at Venus1 and Graff1. Industry insiders are gushing with superlatives at what a game changer this find will be for Namibia. The find has been called the biggest ever in Sub-Saharan Africa.

The critical issue for South Africa is that this game-changing find is in the extreme south of Namibia’s territorial waters. Neighbouring offshore blocks in South African waters likely hold very similar potential.

Recent finds in the 11B/12B exploration block 175km off South Africa’s south coast already promise to be catalytic for South Africa. Properly developed, they could easily save PetroSA and give a massive boost to our economy, save forex, grow local business, and develop skills without depleting the fiscus.

But investors have other attractive global options. We need to ensure that South Africa becomes a practical investment destination compared to these rival opportunities.

What about renewables?

While we accelerate our move towards renewable energy, there remains a need to underpin the intermittency of wind and solar with reliable, dispatchable baseload power. We can do that with coal, as we do now. Or more economically, with around 30% fewer CO2 emissions by using liquified natural gas (LNG).

At a time when South Africa’s power-supply deficit has become self-evident, LNG also offers a short-term solution in that it can be imported, through the South African and Mozambican ports network, and plugged into pipeline infrastructure relatively quickly.

At the same time, we can continue expanding our encouraging PPP programme of rapidly expanding renewables, while also continuing with onshore and offshore exploration for domestic natural gas resources – of which there are already encouraging signs.

Perhaps, unfortunately, the world will need oil and gas well beyond mid-century to meet all of its energy needs. And of these options, gas is the less harmful. Gas will enable renewables at a lower environmental cost – granting us the medium-term energy independence to continue renewables investment. This is the “just transition” in practical action.

Realistically, fulfilling our energy needs means multiple generations and distribution technologies. In the short term, it will also sometimes be necessary to trade off climate commitments and energy provision. Here, LNG also offers a solution – the reliability of oil and coal, with smaller environmental impacts.

We must protect the planet and act responsibly. We must develop skills and transition to new-economy jobs. At the same time, there is no material quality of life and industrial development without energy.

As the ANC elective conference approaches, the governing party would do well to consider that oil-and-gas exploration could also provide CAPEX, infrastructure and thousands of jobs in the power sector – with even further downstream effects.

Right now, just under 10% of our power comes from renewables. The rest is mainly from coal. While this is changing, shifting demand and investment from coal is not proving easy. The policy framework, Integrated Resource Plan, Gas Master Plan and related licensing and regulatory instruments all need rapid simplification and integration to make investment attractive and easy.

Investment flows to the markets that are attractive, certain and ready. The forthcoming Africa Oil Week  in Cape Town will be a great opportunity for South Africa to prove we are indeed open to the oil-and-gas business. We need international investment at scale – and LNG and oil and gas exploration can deliver this.

Distributed by APO Group on behalf of Africa Oil Week.

By Josef Kefas Sheehama

Honourable Tom Alweendo, Mines and Energy Minister, has revealed that the government is looking to cancel the Namcor levy by removing the fuel levy and, as a result, creating a wider range of discounted offerings at the pumps. The estimated Namcor levy was 7.6 cents per litre of fuel sold in Namibia before being reduced to 3.8 cents to ease the burden on consumers.

The policy changes that affect fuel prices will affect households that consume fuels. Furthermore, fuel levy increases will not only affect the prices of fuels consumed by households but also the prices of other goods consumed because of the impact on the fuel inputs of these goods. The Namcor fuel levy has been replaced by a viable alternative source of income. The retail outlets are relevant in towns such as Windhoek, and Otavi amongst others. This means Namcor entered into the distribution and marketing of petroleum products, through commercial markets. Therefore, we applaud the Government for this positive development, due to possible good economic policies pursued by the Namibia Government. The fuel pump prices affected the cost of living, as fuel drives the prosperity of the economy for any nation and should therefore be readily available and at affordable prices. With the Russia-Ukraine conflict continuing to impact the price of crude oil globally, this has had a direct impact on fuel prices in Namibia. The plan to cancel the fuel levy is a manifestation of government and stakeholders’ rendezvous concerted efforts to revamp the economy through austerity measures as enshrined in NDP and HPPs. This comes amid concerns from a cross-section of the public about the impact of rising fuel costs on their pockets.

It is important to note that the fuel levy funds are not necessarily ring-fenced for roads and transport. The money goes into the Namcor pot, to be used and allocated in the best way to most effectively manage the country’s affairs. Another point, on 21 September 2015 as per the Ministry of Mines and Energy website asserted that “The fund was established in 1990 and its levies comprise an equalisation levy (Petroleum levy charged at 73 cents per litre and 87 cents on petrol and diesel. The levy consists of a Namcor levy (7,6 cents per litre), a strategic oil storage levy (40 cents on petrol and 50 cents on diesel), a fuel marking levy (2 cents) and an electricity levy (1,08 c/kWh). It also subsidizes the transporting of fuel to rural areas to ensure the equalisation of fuel prices countrywide”.

I, therefore, commend Minister Honourable Tom Alweendo for making this bold decision and revealing that the government is looking to cancel the Namcor levy. With the pressure lifted by removing the levy on fuel, the economy will in all likelihood also have room to grow. If coupled with deregulation of the labour market and making other moves to improve the ease of doing business, the government may end up making even more money as more taxpayers enter higher levels of income across the board.

The Road Fund Administration and the MVA funds levies remain at 74 cents and 37.72 cents respectively. Consider it essential, because it is. It should therefore be allowed. The biggest possibly negative consequence of removing levy from petrol would be that Namcor will lose a huge source of revenue. But we have so many taxes already such as income tax, VAT, corporate tax, inheritance tax, tariffs, levies the list goes on which can contribute to the National budget. Namibia needs to abolish all fuel levies. Namibians remain easy targets for revenue collection although many are suffering as a result of increases in the fuel price. We rely on our vehicles to get to and from work daily. And, if this good proposal is not considered, will not only impact transport costs, but also things such as bus and taxi fares increase inflationary pressure on other commodities that rely on road transport to be delivered across Namibia. The Electricity Control Board (ECB) has approved an average electricity tariff increase of 7.6% for the 2022/2023 financial year. It is unclear how long the cost of living crisis will last. Therefore, we applaud the Honourable Minister’s decision for coming up with this innovative idea, and it is our sincere hope that it will bring in some extraordinary outcomes for both Namibians and the business sector dealing with oil.

Moreover, transforming State-Owned Enterprises into profit machines from secondary sources is vital. The reforms revolved around delivering intense policy changes to state-owned enterprises (SOEs), so that they remained no longer reliant on taxpayers’ funding just to keep operating, since generating profits would spur expansion with added investments. And if the SOEs did not succeed, they remained expected to go bankrupt, while more private-funded companies would take over. Private companies succeed when they generate more revenues and profits, sparking a new cycle of wealth. When some people get rich, others benefit too. The SOEs reform should not be targeted to keep poorly-run organizations afloat, but to make them more streamlined, efficient and profitable. Without scoring profits, the CEOs should explain to the government, why they deserved more subsidies. The government should reward those bringing added value to government coffers while cutting off funding to inefficient SOEs. Success breeds success, while failures are minimized. Rather opt to expand the economy to an inclusive stronger economy than protecting the run-down, poorly managed, bankrupt state-owned enterprises to save a few jobs but thereby bankrupting the government, and missing out on creating a lot more new job opportunities and wider spread poverty relief. What we stand and fight for today, will surely affect the well-being of our children tomorrow. Therefore, Namcor’s diversification strategy will increase profit and achieve higher sales volume. Well done.

To that end, the move will spare the country from hitting high inflation and will relieve Namibians, who would otherwise have to dig deeper into their pockets. I, therefore, believe that removing this fuel levy will not only create a huge lifeline for ordinary citizens but will also stimulate business and commercial activities of the economy which have been hardest hit by the upward rise in fuel prices.