Africa-Press – Namibia. Namibia should not rush to build an oil refinery before finding commercially viable oil, analysts say.
This comes after president Netumbo Nandi-Ndaitwah recently announced plans to build the country’s first oil refinery.
Some analysts, however, say such a venture should be supported by the private sector as it would be too costly to run with taxpayers’ money.
Former petroleum commissioner Imms Mulunga says while the idea is noble, the process would be too expensive, with minimum profits.
Additionally, competing on the global market with dominant players would be hard, he says.
“No private sector investor has to date managed to pull it off, despite many proposals over the years to build a refinery in Namibia,” Mulunga says.
He says it would be sensible for Namibia to consider a refinery only after producing its first oil.
“However, it should be a private sector-led initiative based on a positive feasibility study yet to be conducted,” he says.
‘SMALL MARKET’
TotalEnergies chief executive Patrick Pouyanné last week advised Nandi-Ndaitwah against building an oil refinery.
He said Namibia’s small market size would leave it struggling to compete against larger economies.
Namibian Sun has reported that Pouyanné said this following a closed-door meeting with the president.
“Namibia would have to compete with other very large refineries – in China, India, Saudi Arabia,” he said.
“I fully understand the logic behind the idea, because of course the citizens of Namibia would like to benefit from better access to affordable gasoline. We will study ways to help,” he said.
LIMITED FDI
Energy expert Ibrahima Aminu says Namibia should wait until the commercial viability of its oil has been confirmed before committing billions to a refinery.
The country’s vision for industrial growth through value addition must be pragmatic, he says.
“Financing a US$5 to US$10 billion project is daunting, given Namibia’s limited foreign direct investment in energy.
“Public-private partnerships, leveraging interest from firms like Chevron, could help, but government-run models, as seen in Nigeria’s and Ghana’s inefficiencies, should be avoided,” Aminu says.
He says starting with imported crude oil provides flexibility, but the envisioned 2027/28 transition depends on unproven local production.
“Export markets in the Southern African Development Community region offer potential, but competition and logistics via Walvis Bay demand a sharp strategy,” he says.
Additionally, existing refineries in neighbouring countries like South Africa (with 108 000 barrels per day), Nigeria (with 650 000 barrels per day), and Ghana (with 45 000 barrels per day), along with planned facilities in Uganda and Senegal suggest a potentially crowded market.
Roman Grynberg, a professor of economics, says Namibia has to wait until the size of its oil deposits has been determined.
He says countries like Nigeria have issues with refineries even though they have huge oil deposits.
Grynberg advises the government to put a clause in contracts with oil companies that in the event a refinery proves viable, their sales agreements would lapse and they would sell to Namibia first.
“This is because their intention is obviously just to export,” he says.
MORE LOCAL PLAYERS
In a speech delivered on her behalf at the seventh edition of the Namibia International Energy Conference last week, Nandi-Ndaitwah said Namibia is exploring the establishment of an oil refinery.
She said this aligns with the country’s broader efforts to maximise the economic benefits derived from its energy resources and to create more local participation within the sector.
“Local content also includes value addition, such as developing downstream capacity and infrastructure like a refinery,” the president said.
DEVELOPMENTS
Currently, Namibia is awaiting approval for Clasox Petroleum to build a refinery at Walvis Bay.
The company’s environmental assessment report states: “The construction of a world-class oil refinery, which will be the first in the country, will augment the economic potential of Namibia and the Erongo region. It will also enable innovation and the introduction of new technologies.”
Clasox Petroleum is undertaking this project in partnership with Plama Refinery, a major Bulgarian petroleum company.
According to the report, the refinery’s output is intended to serve not only the Namibian market, but also the regional market.
Additionally, Mining & Energy reported in January that ISF Trading Enterprises has announced plans to construct a 300 000 barrel-per-stream-day modular oil refinery at Walvis Bay.
This refinery will initially process imported crude oil, with a planned transition to locally sourced crude oil expected between 2027 and 2028 as Namibia’s oil production increases.
TANK FARM
As part of this refinery development, ISF Trading Enterprises also intends to build a crude and petroleum products tank farm.
This facility will include a 12-day crude storage capacity of 573 000 cubic metres across 12 tanks, and a three-day refined product storage capacity of 145 000 cubic metres across eight tanks, designed to support the refinery’s full operational capacity.
In 2023, the then Ministry of Mines and Energy announced that Namibia was considering acquiring a stake in the Lobito Refinery in Angola.
The Lobito Refinery will have the capacity to produce up to 200 000 barrels of refined crude oil per day, spearheaded by Angola’s state-owned Sonangol EP.
In January this year, Angola’s Sonangol was in talks with Chinese and European banks to cover a US$4.8 billion funding shortfall for the construction of the refinery.
THE BEGINNING
Namibia became an oil exploration hotspot after several discoveries along its coastline in recent years.
The initial hydrocarbon discovery in PEL39 was by Shell and its partners, QatarEnergy and Namibia’s national oil company Namcor, in 2022. This was followed by a subsequent discovery by TotalEnergies in a nearby block.
Over the past three years, Shell has drilled nine wells within the PEL39 licence area, leading to several additional discoveries.
Shell has conducted six exploration and three appraisal wells in this block, more than in any other exploration area in Namibia.
The initial discoveries were estimated at 2.6 billion barrels.
However, Portugal’s Galp Energia announced a substantial find of at least 10 billion barrels of oil equivalent in its Mopane field, located within the Orange Basin.
Currently, more than 12 oil companies, including Exxon and Brazil’s national oil company, have expressed interest in acquiring a 40% stake in Galp Energia’s major offshore discovery.
Namibia is targeting first oil production between 2029 and 2030.
However, petroleum commissioner Maggy Shino at a recent energy conference indicated that Namibia is actively seeking to accelerate this timeline.
THE TEHRAN CONNECTION
The idea of an oil refinery is not new to Namibia.
The Namibian in 2011 reported that the government was in talks with Iran to develop an oil refinery.
At the time, Iranian Fars News Agency reported that the country’s foreign minister, Ali Akbar Salehi, said his country planned to build an oil refinery in Namibia.
The issue was also discussed with then foreign affairs minister Utoni Nujoma and mines and energy minister Isak Katali.
Then foreign affairs ministry permanent secretary Veiccoh Nghiwete said he could not comment as he had no knowledge of the matter.
The Namibian also reported that Namibia was in partnership with Nigeria for the development of an oil refinery at Walvis Bay.
When the media first began reporting on the prospect in 2001, the total estimated cost of the refinery was U$200 million.
It has now skyrocketed to between U$3 billion and U$4 billion, or N$24 billion and N$32 billion, according to yesterday’s exchange rate.
For More News And Analysis About Namibia Follow Africa-Press
