Central bank chief calls for realism in oil production expectations
Bank of Namibia governor Johannes !Gawaxab has urged Namibians to temper their expectations regarding the country's potential as a major oil and gas producer until a final investment decision (FID) is reached on commercial development projects.
His remarks came during a recent monetary policy announcement, where he acknowledged the initial optimism surrounding Namibia's oil prospects but emphasised the need for realism.
“What we need to do as a nation is to lower our expectations. I think the hype was too high, right, so, we need to lower our expectations and wait until we have got an FID decision, that's a decision to be made by one of the oil majors if they want to develop the fields,” !Gawaxab said following the announcement of the repo rate after the central bank’s monetary policy committee met this week to discuss the lending rate for commercial banks.
According to !Gawaxab, Namibia’s political stability was seen as attractive to investors seeking to make significant investments in the country.
“We have political stability in the country, we have got what investors are looking for, policy certainty in the country, so as far as oil is concerned, that's the only basis,” the central banker said.
!Gawaxab added that there was no guarantee that oil and gas companies would strike black gold immediately upon exploration.
“When you explore, there's no guarantee that you're going to have commercial viability. You need to do the work to get to that, so, my take is that we remain an attractive destination.”
“There are other basins that people are looking at, so, my own take, yes, we are. In the Bank of Namibia, we are building capacity to further understand, better understand the industry, what's commercially viable, what's not commercially viable,” he added.
!Gawaxab said he did not believe Shell’s recent write-off of $400 million regarding its exploration activities in Namibia would change the sentiment of other oil and gas majors currently exploring for prospects.
Shell recently said it had discovered hydrocarbons in the Petroleum Exploration Licence (PEL) 0039 block, but that the discoveries “remain challenging due to resource mobility and permeability, and a high gas- to-oil ratio” that makes “extracting oil and gas harder” at the moment.
“When you do world exploration, you never know, it's a high risk game. The company lets you borrow a significant amount, and because one company has decided to write down $400 million or $300 million, whatever their bond is, doesn't say we have become unattractive overnight,” he said.
His remarks came during a recent monetary policy announcement, where he acknowledged the initial optimism surrounding Namibia's oil prospects but emphasised the need for realism.
“What we need to do as a nation is to lower our expectations. I think the hype was too high, right, so, we need to lower our expectations and wait until we have got an FID decision, that's a decision to be made by one of the oil majors if they want to develop the fields,” !Gawaxab said following the announcement of the repo rate after the central bank’s monetary policy committee met this week to discuss the lending rate for commercial banks.
According to !Gawaxab, Namibia’s political stability was seen as attractive to investors seeking to make significant investments in the country.
“We have political stability in the country, we have got what investors are looking for, policy certainty in the country, so as far as oil is concerned, that's the only basis,” the central banker said.
!Gawaxab added that there was no guarantee that oil and gas companies would strike black gold immediately upon exploration.
“When you explore, there's no guarantee that you're going to have commercial viability. You need to do the work to get to that, so, my take is that we remain an attractive destination.”
“There are other basins that people are looking at, so, my own take, yes, we are. In the Bank of Namibia, we are building capacity to further understand, better understand the industry, what's commercially viable, what's not commercially viable,” he added.
!Gawaxab said he did not believe Shell’s recent write-off of $400 million regarding its exploration activities in Namibia would change the sentiment of other oil and gas majors currently exploring for prospects.
Shell recently said it had discovered hydrocarbons in the Petroleum Exploration Licence (PEL) 0039 block, but that the discoveries “remain challenging due to resource mobility and permeability, and a high gas- to-oil ratio” that makes “extracting oil and gas harder” at the moment.
“When you do world exploration, you never know, it's a high risk game. The company lets you borrow a significant amount, and because one company has decided to write down $400 million or $300 million, whatever their bond is, doesn't say we have become unattractive overnight,” he said.
