Informanté consulted several leading economists this week to put the issue into perspective of how Namibians should digest the news of rich oil finds off the country’s coast. Since the Minister of Mines and Energy Isak Katali announced in July this year in the National Assembly that an estimated 11 billion barrels of oil reserves had been discovered off Namibia’s southern coast, Namibians and in particular coastal residents caught the “oil fever”.
There are speculations of mammoth growth opportunities for Walvis Bay and a subsequent shortage of houses and service delivery. In more than one instance Informanté had been told by property owners that they will hold onto their properties, as profits would double upon selling these housing units in two or three years from now on when “the oil is flowing”.
Namibia featured in news headlines internationally since Katali’s remarks of a “herd of elephant” discovery of offshore oil reserves. In the oil industry an elephant refers to an oil field of a billion barrels in size. Namibia is already ranked alongside Libya, Angola and Nigeria as one of the richest oil countries in the world.
Although the promises of rich oil finds have been made, Brown warns that no drilling had taken place yet and the physical oil is yet to be produced. Informanté also consulted independent economist Robin Sherbourne, who echoed the same sentiments, but could not shed more light on the matter as he was away from office.
There are still too many loose ends as to how deep the oil reserves are situated, how expensive it is to extract and whether the time-frame of four years before production can indeed be honoured.
In the case of Kudu, the gas field was already discovered forty years ago, but gas is still to be produced from there. Whether the same will apply to the oil discovery, is anybody’s guess, as reserves must still be confirmed by drilling later this year and in the years to come.
The oil boom will also require physical infrastructure development for production and only then can Namibia really be propelled “into the big game”. Other open ended questions are how the coastal towns can benefit and the opportunities to be created for Namibians and local companies in any pre and post-development stages. “Too early for any concrete conclusions”, both economists concur.
Once in the big game the downstream issues will be debates such as how the country would apply its oil profits for the good of the nation as a whole. Most importantly is how the country would deal with potential disasters such as the recent oil spills in the USA’s Gulf of Mexico and the North Sea, or the effects of the so-called “Dutch disease” whereby a massive inflow of foreign exchange might cause the Namibian Dollar to appreciate in value, at the expense of other exports which would take a knock in export earnings against the major trade currencies.