Namibia, a newcomer to oil and gas, is under global scrutiny following major offshore discoveries by Rhino Resources, Galp Energia, Shell, and TotalEnergies in the Orange Basin. These finds, potentially totaling three billion barrels, mark the country’s first major success after years of limited exploration.
To maintain investor interest and advance to production, Namibia must ensure smooth contract negotiations and demonstrate respect for the industry’s investments. A key step is incorporating a fiscal stability clause in petroleum contracts to protect companies from future legislative or tax changes that could harm their economic interests.
A fiscal stability clause—also known as an economic rebalancing or equalization clause—ensures that oil and gas companies are protected from financial losses due to new laws or regulations introduced after a contract is signed. This can include exemptions or compensation for added costs, helping to preserve their return on investment. For Namibia, including such clauses in petroleum contracts is crucial to sustaining investor interest in its emerging oil and gas sector.
Fiscal stability clauses, common in countries like Guyana, Mozambique, Mexico, and Angola, provide essential investment security by ensuring that oil and gas companies’ returns aren’t negatively affected by future legal or regulatory changes.
These clauses enhance predictability and are crucial for long-term, capital-intensive projects. While Namibia has made strides in creating an investor-friendly environment, including updates to its tax laws, adding a fiscal stability clause is a vital next step to further attract investment and reduce risks for international oil companies.
Namibia must quickly implement a fiscal stability clause in its petroleum agreements to avoid delays in negotiations with major energy companies like BW Kudu, Rhino Resources, Galp Energia, and TotalEnergies. Failing to do so, alongside local content legislation, could lead to costly project setbacks, as seen in Mozambique’s Rovuma Basin, where long negotiations have delayed major projects. Similarly, in Uganda, Tullow Oil faced over a decade of disputes before TotalEnergies could move forward with oil production.
Delays in these projects hindered economic benefits, highlighting the importance of swift action to secure investment and avoid costly delays in Namibia’s oil sector.Namibia must act swiftly to include a fiscal stability clause in its petroleum agreements to protect companies’ investments and prevent delays in exploration projects.
This will help secure more exploration in the Orange Basin, Walvis Basin, and other promising areas like the Luderitz and Namib Basins. Several companies, including Eco Atlantic and Chevron, are already exploring these regions, but investor confidence could wane if Namibia is seen as a risky investment destination.
