NAMIBIA this week embarked on its biggest oil-drilling expedition following reports of increasing numbers of discoveries on the west coast of Africa in recent years.
"We are excited about the drilling and when we find oil we will invite you to the celebrations," Namibia's Minister of Energy Isak Katali said.
The country planned to start drilling the first of four holes on Friday and will spend around R2.7bn over the next eight months in hopes of finding oil.
Countries lucky enough to find oil see a direct boost to their GDP growth. Angola's GDP growth increased from 3.4% in 2010 to an expected 7.1% this year, with its oil industry growing at around 15% a year and prices climbing.
Namibia hopes for GDP growth of between 4.3% and 4.5% this year, while South Africa is looking at 2.7%.
Stanlib Africa manager Humphrey Gathungu said finding oil would hold significant benefits for Namibia in terms of exports and boosting the country's foreign exchange reserves and downstream activities - generating significant income for the country if the find is big enough.
"It would have a multiplying effect in terms of things like labour, skills transfer and further industrialisation," he said.
Namibia's hopes of finding oil are based on the 22 discoveries of its northern neighbour Angola, which have helped the formerly war-stricken country become one of Africa's major economic players over the past decade.
On the same coastline, Ghana has had 16 major discoveries over the past five years.
To date, Namibia has drilled 17 wells to no avail. Last year UK company Chariot Oil&Gas failed to make a commercial find after drilling two exploration wells in six months.
DHL Express MD Hennie Heymans said: "We are currently not sure of the likelihood since there have been reports that the initial drilling programmes have not been that successful. However, international oil companies are still expressing interest, so there must be some reasonable chance of this."
Namibia's energy director general Selma-Penna Utonih remains positive and points out that Norway drilled 70 wells before striking oil.
Big oil companies that have shown interest in Namibia include BP and Repsol, which picked up licences in the past two years on a bet that Namibia's coastal shelf mirrors that of Brazil, where oil has been found.
"It's all about the geography," explained Katali. Hundreds of millions of years ago Africa and Brazil were one continent, hence the tectonic plates are the same. Ultrasound technology and seismic data have shown analogues on the coastline similar to the petroleum systems found at the Santos and Campos basins in Brazil, he said.
Brazilians are keen to provide expertise and funding for the latest drilling expedition, which has been set in motion by Namibian Knowledge Katti.
Katti initially secured the oil drilling licensing from the Namibian government through his company Kunene Energy and went on to raise about R500m on the Toronto Stock Exchange. The company was then bought out for R5-bn.
Katti used the money from the acquisition to buy himself a large stake in HRT - the company now drilling for oil - thereby regaining significant exposure to the drilling expedition and the potential profits.
Katti said it is important to retain local influence in the industry, considering that all mines in Namibia are currently foreign owned. Namibia does not have an official localisation policy but follows a black economic empowerment (BEE) policy similar to that of South Africa.
Concerns have been raised about exclusive licensing agreements that are allocated in line with BEE and then farmed out to foreigners, but Katti said he was trying to avoid such a scenario by directly buying into the big multinationals, such as HRT in this case.
Retaining some local ownership is becoming increasingly important, considering that almost 90% of oil and gas operations in Africa's largest oil-producing country, Nigeria, is owned and operated by international oil companies.
Paul Eardley-Taylor, head of Standard Bank's oil and gas team in Southern Africa, said the region is one of the most attractive in the world when it comes to oil and gas prospects. "In Mozambique alone, $2-billion [R18.3-bn] has been spent on exploration ventures and that is just the start of things. Tens of billions of dollars will be spent developing the oil and gas industry of Southern Africa in the next decade," he said.
Forecasts by GBI Research show that offshore drilling expenditure in Africa and the Middle East will climb steadily from $13.56-bn (R119.4 bn) in 2012 to $17.03-bn(R156.5 bn) in 2016.
Cumulatively, the total expected spend for this five-year period is $77.3-bn (R710.3-billion), which represents an increase of about 22% over the previous five-year period.
Stanlib Africa portfolio manager Thabo Ncalo said the investment fund company is seeing significant interest in the African oil story from companies listed in Canada and Australia.
According to Eardley-Taylor, South Africa is also likely to benefit: "There will be spillover benefits that will include things like skills and expertise taken over, construction companies needed to build infrastructure and even niche services like aviation and catering."
* This article was first published in Sunday Times: Business Times