Petroleum operators worried about tax proposals

16 Nov 2013 16:50pm
WINDHOEK, 16 NOV (NAMPA) – Members of the Namibian Petroleum Operators’ Association (NAMPOA) are worried about tax proposals made by Government, and will soon acquire legal services to discuss the way forward.
NAMPOA chairperson Martin Davis, who is also the country manager of Brazilian oil firm HRT, raised the concern during the 20th anniversary celebrations of the Petroleum Training and Education Fund here on Friday evening.
“As a sector, withholding tax affected our operations negatively as nearly all the services required in a drilling campaign need to be procured overseas.
We will shortly be contracting legal services and start a round of meetings with Government organisations to discuss issues of concern to the petroleum industry. We are concerned about the recent tax proposals that could have a serious impact on our exploration activities, such as the extension of transfer duty to 200 nautical miles that will affect our members’ farming-out interests to other partners,” he noted.
At the end of 2011, new legislation was brought in to allow the imposition of a 25 per cent withholding tax on payments by local companies to a broad range of non-resident service providers. The expectation is that non-resident service providers will simply gross-up their invoices by 33 per cent so that a 25 per cent withholding tax yields what they would have received in the absence of the tax.
There is a debate about the possibility of using Double Taxation Agreements (DTAs) to avoid paying this tax, which is a burden and likely to fall on Namibian operations.
According to Davis, huge financial investments are involved in drilling, requiring companies to share the risks by farming-out participation in blocks to other companies.
In moving forward, NAMPOA will ensure that members have a co-ordinated system in place to assist the industry. It will not only be to raise concerns, but also a platform to share information for the benefit of the success of the petroleum industry.
Meanwhile, Davis expressed confidence that oil will be discovered in Namibia.
Once this happens, there will be a need for a pool of locally-skilled professionals to help move the industry to greater heights.
HRT was close in discovering non-commercial oil off the Namibian coast in May this year.
Davis said the company proved the source rock and recovered oil, but missed a reservoir.
“Once we have a discovery, the requirements for the industry will change and we will need engineers and other professionals. In Namibia, a dozen or so exploration wells have been drilled, whereas it took 200 wells before a commercial discovery was found in the North Sea,” he added.