THE managing director of the National Petroleum Corporation of Namibia (Namcor), Obeth Kandjoze, this week said the N$50 million 'signature bonus' received from Brazilian oil and gas company Cowan Petróleo e Gás (Cowan) was an opportunity for the company to earn money.
He said the principle is that Cowan would pay all production costs on behalf of Namcor, including development costs if oil or gas is discovered in blocks along the coast of southern Namibia licensed to Cowan.
Kandjoze said the 'signature bonus' is an income to Namcor and is accounted for in the normal treasury procedures like all other income.
Part of the agreement between Namcor and Cowan is that the Brazilian company will provide specialised training to Namcor's technical staff.
Cowan received a gas and oil exploration licence in blocks 2613A and 2613B in the Lüderitz sub-basin in 2011.
In August last year, Namibian businessman Knowledge Katti boasted that he had facilitated the partnership between Namcor and Cowan, and said the N$50 million 'signature bonus' Cowan paid Namcor that month had come with "no strings attached" and that Namcor would not have to pay a penny for the exploration work.
But Katti's involvement as an apparent middleman raised eyebrows.
Namcor yesterday said that it has no relationship with Katti and that it did not pay him or any individual a commission for the alleged 'facilitation'.
Notwithstanding, Namcor retains 15 percent carried interest equity in the deal, which Namcor said is a form of a loan and paid back only once production in the exploration blocks starts.
Namcor said the principle is that Cowan would pay all exploration costs on behalf of Namcor, including development costs, if there is a discovery of oil or gas.
It said this is standard practice in the oil and gas industry when one partner [Namcor in this instance] does not have the means to pay for exploration and development costs.
Once production starts - depending on what is discovered in the blocks - Namcor and Cowan would agree on a formula for the repayment of the carried costs, in which Cowan then repays the costs from its production revenue.
If no discovery is made, Namcor is not liable to pay back the 15 percent carried costs.
Namcor has not received any prior 'signature bonuses' until the Lüderitz basin licence was awarded to it as caretaker in 2008.
This licence was relinquished by Hunt Oil Company in 2008 and was awarded to Namcor by the Ministry of Mines and Energy with the understanding that Namcor would use the six blocks covered by the licence to bolster its revenue and attract renowned companies to conduct exploration.
Namcor had initially held discussions with Chariot Oil & Gas to "farm out" some of the blocks, but these discussions were not successful.
It then engaged Serica Energy Plc to partner it and take a licence in the central block, and as part of the agreement, Serica Energy Plc paid Namcor a signature bonus of US$1 million.
This, Kandjoze said, was the start of 'signature bonuses' for Namcor.