Namibia to enjoy majority of oil revenue, Shiimi says
Finance minister Ipumbu Shiimi says Namibia will enjoy the bulk of its oil resources, primarily because the Petroleum (Taxation) Act makes provision for that.
Speaking to Network Television, Shiimi said Namibia was geared to earn up to 65% of the oil proceeds, while international oil companies such as Shell, TotalEnergies and, more recently, Galp - which have since 2022 announced mega finds - stand to walk away with up to 35% return on their investments.
This is despite Namibia’s low free-carried interest equity stakes in the Graff-1, Venus X-1 and Mopane wells through the National Petroleum Corporation of Namibia (Namcor).
“If you look at the Act and other legislation that is going to manage these resources, we believe Namibia is going to get the majority of the cake. In fact, we think, at the moment, 65% of the cake will remain in Namibia, so investors will only be left with 35%,” he said.
Tax legislation explained
In terms of Namibia’s current tax legislation regarding petroleum resources, royalties are calculated as 5% of gross revenues. Royalties are generally payable quarterly, calculated by using the market value of crude oil. In addition, the petroleum income tax is levied at 35% of taxable income and an additional profits tax is levied on the after-tax net cash flows from petroleum operations, auditing firm PwC Namibia explained in a oil tax guide.
“Licence holders are required to pay annual charges for the benefit of the State Revenue Fund, calculated by multiplying the number of square kilometres included in the block or blocks by the amounts provided for in Section 67 of the Petroleum Act. In the case of exploration licences, the charge is calculated as follows: During the first four years, N$60 per square kilometre; during the next two years, N$90 per square kilometre; during the subsequent two years, N$120 per square kilometre. Thereafter, it is N$150 per square kilometre. In the case of production licences, the fee is N$1 500 per square kilometre,” PwC said.
Billions in revenue
Shiimi emphasised that while the government stood to earn significant oil revenue in the form of taxes and royalties, ordinary Namibians too could share in the proceeds.
“It also depends on how we are going to build the skills because, to participate as Namibians, we must see more Namibians on the oil platforms. So, that way, the revenue also comes directly to individual Namibians,” he said.
According to an assessment by the University of Cape Town, Namibia’s recent oil discoveries in the Orange Basin are estimated to generate about N$443 billion in investment and N$53 billion in revenues from taxes and royalties.
Meanwhile, opposition leader McHenry Venaani in the past voiced his stern opposition to Namibia’s interest in discovered oil and gas resources. He described government's stake in the oil finds as 'meagre', adding that such negotiations are an example of the state having negotiated in bad faith.
The Popular Democratic Movement (PDM) leader further emphasised that incorrectly structured oil exploration agreements have far-reaching consequences.
“If we conclude agreements that are not favourable to the developmental objectives of the country, our oil resources will not benefit Namibians,” he said.
Speaking to Network Television, Shiimi said Namibia was geared to earn up to 65% of the oil proceeds, while international oil companies such as Shell, TotalEnergies and, more recently, Galp - which have since 2022 announced mega finds - stand to walk away with up to 35% return on their investments.
This is despite Namibia’s low free-carried interest equity stakes in the Graff-1, Venus X-1 and Mopane wells through the National Petroleum Corporation of Namibia (Namcor).
“If you look at the Act and other legislation that is going to manage these resources, we believe Namibia is going to get the majority of the cake. In fact, we think, at the moment, 65% of the cake will remain in Namibia, so investors will only be left with 35%,” he said.
Tax legislation explained
In terms of Namibia’s current tax legislation regarding petroleum resources, royalties are calculated as 5% of gross revenues. Royalties are generally payable quarterly, calculated by using the market value of crude oil. In addition, the petroleum income tax is levied at 35% of taxable income and an additional profits tax is levied on the after-tax net cash flows from petroleum operations, auditing firm PwC Namibia explained in a oil tax guide.
“Licence holders are required to pay annual charges for the benefit of the State Revenue Fund, calculated by multiplying the number of square kilometres included in the block or blocks by the amounts provided for in Section 67 of the Petroleum Act. In the case of exploration licences, the charge is calculated as follows: During the first four years, N$60 per square kilometre; during the next two years, N$90 per square kilometre; during the subsequent two years, N$120 per square kilometre. Thereafter, it is N$150 per square kilometre. In the case of production licences, the fee is N$1 500 per square kilometre,” PwC said.
Billions in revenue
Shiimi emphasised that while the government stood to earn significant oil revenue in the form of taxes and royalties, ordinary Namibians too could share in the proceeds.
“It also depends on how we are going to build the skills because, to participate as Namibians, we must see more Namibians on the oil platforms. So, that way, the revenue also comes directly to individual Namibians,” he said.
According to an assessment by the University of Cape Town, Namibia’s recent oil discoveries in the Orange Basin are estimated to generate about N$443 billion in investment and N$53 billion in revenues from taxes and royalties.
Meanwhile, opposition leader McHenry Venaani in the past voiced his stern opposition to Namibia’s interest in discovered oil and gas resources. He described government's stake in the oil finds as 'meagre', adding that such negotiations are an example of the state having negotiated in bad faith.
The Popular Democratic Movement (PDM) leader further emphasised that incorrectly structured oil exploration agreements have far-reaching consequences.
“If we conclude agreements that are not favourable to the developmental objectives of the country, our oil resources will not benefit Namibians,” he said.
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