Namibia Oil Boom: The Next Guyana!

In the last two years, major oil companies such as Total, Shell and Chevron have discovered more than 10 billion barrels of oil (=> hunting anomalies!) off the coast of Namibia.

Total and OPEC (OPEC is the Game Master) are anticipating the commencement of oil production by 2030 (a significant catalyst).

There are several articles on Bloomberg, here are some snippets:

• „TotalEnergies and Shell in recent years have made discoveries estimated at 2.6 billion barrels, setting the stage for the southern African country to plan production from about 2030“

• "We are excited about the potential of the Namibian OPEC partnership and stand ready to offer support at this crucial juncture," Al Ghais said in a pre-recorded message at an international energy conference in Namibia.

• "We encourage potential investors to look at Namibia and the abundance of possibilities here," OPEC's Al Ghais said.What does a career in web design involve?

Namibia can become the next Guyana

Namibia could undergo a development similar to that of Guyana: a sparsely populated country suddenly receiving substantial oil revenues, which can be reinvested in infrastructure (multiplier effect). Which in turn leads to even more economic growth!

First oil production

The first FPSO (Floating Production Storage and Offloading) should come online in 2030 and produce around 200,000 barrels per day (bpd). With a 50% government take and an oil price of USD 90 per barrel, this would result in approximately USD 3.3 billion in additional government revenue (without considering the multiplier effect).

Peak production

Based on the existing discoveries, Namibia is projected to have a peak production capacity of 700,000 barrels per day (bpd) by mid 2035, according to energy consultancy Rystad Energy. 

If Namibia can achieve 700 000 bpd, with a 50% government take and an oil price of USD 90 per barrel, it would result in approximately USD 11.55 billion in additional government revenue (without considering the multiplier effect).

To put this into perspective, Namibia's current GDP is USD 13 billion!

Special Situation: South African Rand 

What makes the whole thing even more interesting is that the Namibian currency is currently pegged to the South African rand and South Africa is a mess (=> currently a very weak currency). Once the Namibian economy is booming, it's only a matter of time before they come out with their own currency and revalue it!

How can you invest?

You can buy domestic shares, land and real estate! We find real estate the most interesting because (a) the South African Rand is very weak and (b) real estate is also very cheap in currency adjusted terms!

What makes real estate even more interesting is the fact that there are only three main cities in Namibia (=> the risk of betting on the wrong horse is therefore relatively low!):

1. There is the capital Windhoek (not much to see there in our opinion).

2. There is the industrial city of Walvis Bay, where the country's only deep-water port is located!

3. And then there is the coastal town of Swakopmund, which is popular with tourists and locals alike! Many rich locals from Windhoek have a second home in Swakopmund => they escape the sweltering heat of Windhoek and travel to Swakopmund, where it is much cooler due to the proximity to the sea and the wind!

We find Swakopmund the most interesting, as it benefits from two trends and one USP:

1. The local population is getting richer=> more people want a second home in Swakopmund!

2. The country is becoming safer, and the infrastructure is improving, which in turn leads to more tourists traveling to Namibia! => from which Swakopmund, as a tourism hotspot, benefits disproportionately!

3. Swakopmund has historical buildings from the colonial era (Swakopmund is the most German town in Africa), which are not easy to reproduce (=> a MOAT)!

   
   In addition, Namibia has no capital gains tax (both on real estate and shares)!