Up to go downstream

Alastair Baumann unveils future plans for NAMCOR and ideas to secure downstream recognition.

The field of oil exploration has become a metaphorical battleground, not necessarily for land or sites as you might imagine, but for the future. Companies that invest in their exploration now are doing so to lay new foundations for better, more efficient projects for forthcoming years. Alastair Baumann, Asset Manager for NAMCOR, is fighting this battle on all fronts for the national petroleum corporation in India.

While they are not currently in production, NAMCOR’s plans have led them to a producing field in the Kudu Gas Field in Southern Namibia that, in partnership with their downstream department, they hope will be the beginnings of something exciting.

“The Kudu Gas Field has been in existence for the last 20 years. It was discovered by Shell and it’s a 1.4 TCF field, most probably with some upside potential. That gas field is 54 percent owned by NAMCOR, with partners including Tullow Oil amongst others. In terms of the Kudu Gas Field, it’s of strategic importance in Namibia because it’s earmarked for a gas to power project. So, the sooner we get that out of the ground and off the ground, the better for Namibia and for the Southern African region as a whole because, as you may or may not be aware, there’s a power crisis looming in the next couple of years.”

With this power crisis obviously coming from the world’s energy demand rising, there are debates across both lines as to whether future supplies will be able to keep up with such demand. Some are pure cynics, others daydreamers. But for Baumann, and others just like him, there is real hope for the future.

“We’re certainly hoping supply will keep up with demand, yeah. And once we start producing we’ll manage to see if we can get some upside potential out of it. Apart from that, we just made a recent discovery in the North of Namibia, so hopefully that will supplement it as well. It’s gas, but just not confirmed. There’s some fluids or liquids with it, but it’s a couple of TCF potentially.”

“Namibia’s got quite a good relationship with the large operators, for example Shell. Our regime – our fiscal and legal regime – is quite favourable for operators. We’ve got quite a politically stable country, so relationships are pretty favourable between ourselves and the larger operators.”

Low risk

Indeed, Namibia is definitely a lower risk for NAMCOR as opposed to countries such as Nigeria, and especially when it comes to the attraction of the open licensing system. “In a nutshell,” explains Baumann, “it’s on a first come, first serve basis. Interested companies or parties would come to the Ministry after having had a look at potential open acreage. They got to the Ministry; the Ministry would refer them to NAMCOR where they have a look at certain data. They’d then buy a couple of seismic lines, look at the data and see if they’re interested in that.

“Then the Ministry of Mines and Energy, through the government of Namibia, negotiates a model petroleum agreement where it discusses things like royalties, the license terms and programmes. Namibia has a royalty regime; we don’t have any signature bonuses or anything like that. So, once the model petroleum agreement is finalised through negotiating between the two parties. At the moment, NAMCOR is not entrenched in law that the national oil company must participate in any license. It is, however, advisable because we make life much easier with our technical expertise and knowledge of the country.”

This knowledge of the country has led others, 14 to be exact, to drill exploration wells offshore. However, Baumann predicts that the future will see the introduction of more projects, both on and offshore.

“Well, there’s certainly been a paradigm shift on thinking on Namibia’s explorability. Now we see a lot more happening because of our cooperation with the Brazilians. In Brazil there’s been a couple of massive discoveries. There’s a lot of geological similarity between Namibia and Brazil because we basically share the same margins. So, there’s a lot more interest in Namibia and we really see more happening in the next couple of years in terms of exploration and drilling of more wells.

“However, the biggest challenge will be cost. Namibia thus far has not been an exploration destination, so logistics to and from Namibia is costly. The last well we drilled in the offshore in about 700 metres of water depth was over about US$100 million. That’s a bit of a risk for us, but I’m sure we’ll manage it in the future.”

Managing the future is certainly core to NAMCOR’s success; their downstream operations will need to become a defining force in expanding the company. Currently, NAMCOR imports 50 percent of the country’s few demands. It’s strategy, according to Baumann, is to now become a major player in the downstream industry.

“There are other big players like Shell and Total; we don’t want to take them out. Instead, our strategy is to try and get as many storage facilities as possible in the inland of Namibia. We’ve just opened a storage facility which we built ourselves in the northern part of Namibia and that’s pretty much our strategy – to tackle the downstream demand by these strategic storage facilities in strategic places. I think the next will be the coastal harbour town of Walvis Bay. That’s where we’ll put up our next storage facility.”

The idea of strategic planning for the downstream sector is indeed a relatively risky move considering all the unpredictable factors that are included in economically developing countries. But for NAMCOR and Alastair Baumann, it is a risk well worth taking in order to secure their future and hopefully grow within the business that we know as exploration.

Alastair Baumann is Asset Manager for NAMCOR. He received a BSc (Hons) in Geology from the University of the Western Cape.