Africa Watch – Namibia on OPEC’s radar

The Organisation of Petroleum Exporting Countries (OPEC)+ is eyeing Namibia for possible membership in its Charter of Cooperation as it sets up what could be Africa’s fourth-largest output by the next decade, an African industry official and sources told Reuters. TotalEnergies and Shell have made discoveries estimated at 2.6 billion barrels in recent years, setting the stage for the southern African country to plan production from about 2030. Based on the existing discoveries, Namibia is looking at 700,000 barrels per day of peak production capacity by the next decade.

On paper, OPEC exists to ensure that oil prices remain profitable for its member countries while simultaneously promoting market freedom by minimising regulatory interference. Comprising 13 member countries, it allied with other oil-exporting countries, forming what is commonly called OPEC+ in December 2016.

The group’s foray into Namibia is highly hinged on the African country’s oil discoveries, which could make it the fourth-largest oil exporter in Africa by the next decade. An estimated 11 billion barrels of crude oil was found in the water off the southwest African country’s shores in 2022 by TotalEnergies SE and Shell Plc. Since then, a Portuguese oil and gas company, Galp has made another oil discovery in licence PEL 83 off the country’s coast, located close to the discoveries made by Shell and TotalEnergies. This exploration campaign on blocks 2813A and 2814B situated in the heart of Namibia’s Orange Basin, which is emerging as one of the world’s most prospective oil and gas regions, is being carried out with an Odfjell Drilling-managed semi-submersible rig. These developments put Namibia in a position to corner a bit of Southern Africa’s oil market, especially South Africa.

In reality though, OPEC is a geopolitical entity, and after losing Angola and other members in recent years, OPEC is seeking to expand its influence and stabilise its membership base. This makes Namibia an attractive candidate. Though Ghana recently began oil production, it is not on OPEC’s radar. The general perception is Ghana is still considered a geopolitical lightweight. Ghana’s oil production is not at a scale that significantly impacts OPEC’s overall output or global oil prices. As of May 2023, the crude oil production capacity in Ghana stood at 173,000 barrels per day. Ghana’s Ministry of Energy expects production to reach 500,000 barrels per day by 2024, which is significantly lower than Namibia’s potential peak production capacity of 700,000 barrels.

Through collaboration with OPEC on production quotas, Namibia stands to secure more favourable prices for its oil exports and also cultivate stronger ties with fellow oil-producing countries. However, this development also comes with risks because Namibia’s current capacity is relatively low compared to other OPEC members. Also, joining OPEC might pressure the organisation to prioritise its interests over national advantages. Considering that Angola left OPEC over a disagreement on production quotas, Namibia would need to adhere to production quotas, which could limit its ability to respond to domestic needs.

However, an entry into OPEC will make Namibia join Nigeria and Angola as African members of a global cartel struggling for relevance in a time where pivot away from dirty, fossil fuels are being emphasised. Namibia will be wise to learn from the mistakes in oil wealth management experienced by its African colleagues, Nigeria and Angola. With its commitment to channel oil earnings into a sovereign wealth fund, Namibia seems to be on the right track to avoiding the pitfalls of the oil curse.