Govt needs to rethink natural resource contracts

NJ Ayuk is no stranger to Namibia and the oil exploration exercises in the country. He has knowledge of Africa in general and talks about how oil can transform the lives of many.

This week he advised Namibian leaders to come up with or strengthen contracts in the oil sector to avoid delaying production.

He said the contracts should include what is known as a fiscal stability clause, clearly stating that if Namibia were to make legislative or regulatory changes – such as new tax requirements – the energy companies signing the contract would be protected from negative economic impacts.

Ayuk said if Namibia does not add a fiscal stability clause to its petroleum agreements now, there is a possibility that the issue of financial risk will come up during contract negotiations with Shell, TotalEnergies, and their partners, leading to costly project delays.

Professor Joseph Diescho says that without clear-eyed thinking and planning, investors will own the industry like it was with Namibia’s diamonds and uranium.

Diescho also says it is ludicrous for the Namibian government to say at this early stage that it will borrow from investors to control the investors.

In a paper titled “Namibia’s Opportunity to Lead in Green Hydrogen and Minerals Certification: A ‘Just Transition’, with the Kinshasa Process for African Agency, sustainable development, and mineral certification, Diescho co-wrote with James Bindenagel, saying the immediate challenge for the Namibian leadership is to understand what this new enterprise is about, what possibilities and risks it comes with, and how to stay on top of the game as the major source of not only much needed national revenue but international sustainable development.

Although Ayuk did not talk about green hydrogen, his observation covered that area. While President Hage Geingob’s green hydrogen initiative is laudable, there are some grey areas regarding the result of what Namibia benefits.

We have been told about thousands of jobs being created in the construction phase and after, but there needs to be clarity on the benefits obtained by the nation when production starts.

The whole planning centres on exporting green hydrogen and green ammonia once production starts, and something needs to be said about the local downstream benefits.

Professor Diescho’s observation that investors might end up owning the resources could be true in the end, because the current situation is that the Dutch have gifted Namibia capital to buy the 24 percent stake in the Hyphen Hydrogen venture.

The Green Hydrogen Commissioner James Mnyupe said the Dutch invested €300 million in green molecules, which they will then sell to other countries. This means that the €23 million the Namibian government wants to invest in the green hydrogen venture belongs to the Dutch – something like a forward sale agreement.

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