By Dhiladhila Magazine · Issue 10

A giant discovery is also a financing structure. The interesting question is who paid to find it and who now gets paid.

The headline from Mopane is a volume – ten billion barrels in place. The quieter story is a balance sheet: who put up the money to find the oil, who is carried, and who now stands to be paid. Galp Energia’s announcement on 21 April 2024, which Reuters called one of the Orange Basin’s largest finds, is as much a financing structure as a geological one.

That structure is unusually generous to the Namibian side. Galp operates the PEL 83 licence with an 80 per cent working interest, while the national oil company NAMCOR and a local independent, Custos Energy, hold 10 per cent each – and both are carried by Galp through first sales. The small partners have exposure to a giant field without having funded the drilling that proved it.

What 'carried' actually buys

A carried interest means the operator pays the junior partner’s share of costs and recovers it later from production revenue. For NAMCOR and Custos, that is the difference between owning a tenth of a ten-billion-barrel discovery and owning nothing, because neither could have funded a deepwater campaign that runs to hundreds of millions of dollars. The carry converts a balance-sheet impossibility into an equity stake.

The cost is deferred, not waived. Carried partners repay from their first barrels, so the arrangement front-loads Galp’s risk and back-loads the locals’ return. It is a financing bridge, and like any bridge it carries a toll at the far end.

A carry is not a gift – it is a loan against barrels that do not yet flow.

The listed micro-cap in the chain

The financing reaches further than the three named partners. Sintana Energy, a Canadian-listed exploration company, holds an indirect 49 per cent of Custos, giving it roughly a 4.9 per cent indirect interest in PEL 83. That thread lets public-market money take a position in Mopane through a company most Namibians will never hear of, and it is how a small licence draws on global capital.

For a market watcher, the structure shows how frontier oil is actually funded: layered vehicles, indirect stakes and listed juniors that trade the upside long before a barrel is sold. The plumbing is financial, not physical.

Frontier discoveries are financed in layers, each one further from the drill bit.

Why the share price moved before the oil

Markets priced the news at once. Galp’s Lisbon-listed shares jumped sharply when the ten-billion-barrel estimate landed, a reminder that in oil the discovery, not the production, is often the moment value is created and captured. The company signalled it would look for partners to share the cost and risk of developing Mopane, opening the prospect of a farm-down.

A farm-down – selling part of the stake to a larger operator – would bring cash and capacity, and it is the standard route by which an explorer turns a find into a funded project. In April 2024 that interest was prospective, but the discovery’s size made it close to inevitable.

In exploration the money is often made on the announcement, not the barrel.

Where the national money should sit

For Namibia, the financing question is ultimately fiscal. Revenue will arrive through NAMCOR’s carried stake, through royalties and taxes, and eventually through any state savings vehicle – and none of those channels manage themselves. The decision the discovery raises is not whether money comes, but through which accounts, and whether they are built to hold it.

That is the capital core of Mopane. A carried interest, a listed junior and a probable farm-down all describe how the find is financed; the harder design is the machinery that will one day receive and steward the state’s share.

The find is financed cleverly; the state’s share still needs an account built to hold it.

For a lender, a fund manager or a treasury official, Mopane is less an oil story than a capital one: carried interests, indirect listed stakes and a likely farm-down that will decide who funds development. The decision facing Namibia’s public side is whether to build the fiscal and savings machinery now, so that when the carried barrels finally pay, the money lands in a structure designed to keep it.

Sources: Reuters; Portuguese oil firm’s shares surge over Namibia find (Malay Mail); PEL 83 Mopane-1X light oil discovery (Sintana Energy)