Regulatory and Environmental Risks Reshaping Offshore Oil Exploration in Africa: Assessing Long-Term Viability in South Africa and Namibia

The offshore oil and gas sector in Africa is undergoing a seismic shift as regulatory and environmental challenges redefine the risk landscape for investors. South Africa and Namibia, two nations poised to unlock vast hydrocarbon reserves in the Orange Basin, are at the epicenter of this transformation. Recent court rulings, regulatory reforms, and growing environmental opposition are forcing energy companies to recalibrate their strategies, raising critical questions about the long-term viability of offshore investments in the region.

Regulatory Reforms: A Double-Edged Sword

South Africa's 2025 Upstream Petroleum Resources Development Act (UPRDA) aims to modernize its hydrocarbon regulatory framework, introducing transparent licensing systems, Black Economic Empowerment (BEE) participation requirements, and clearer fiscal terms. While these reforms are designed to attract capital, they also impose stricter environmental and social governance (ESG) standards. For instance, the Western Cape High Court's 2025 ruling against TotalEnergies' Block 5/6/7 project underscored the judiciary's growing role in enforcing compliance. The court found the environmental impact assessment (EIA) for the project “deeply flawed,” citing inadequate public consultation and failure to address transboundary risks. This decision not only delayed TotalEnergies' drilling plans but also set a precedent for heightened scrutiny of future projects.

In Namibia, the government's regulatory review, led by the newly established Upstream Petroleum Unit, is similarly reshaping the sector. Extensions for exploration licenses, such as the 12-month extension for PEL 79 (held by NAMCOR and Giraffe Energy), signal flexibility for operators. However, the emphasis on local content requirements and youth participation—part of Namibia's broader economic strategy—introduces operational complexities. For example, companies like Shell and TotalEnergies must now navigate partnerships with local firms, which could dilute profit margins but align with the government's vision for inclusive growth.

Environmental Opposition: A Rising Tide

Environmental litigation has become a defining feature of offshore exploration in Africa. In South Africa, civil society groups such as Natural Justice and The Green Connection have leveraged the courts to challenge projects they argue exacerbate climate change and threaten marine ecosystems. The 2025 court ruling against TotalEnergies highlighted concerns about oil spills, biodiversity loss, and the incompatibility of fossil fuel projects with South Africa's Nationally Determined Contributions (NDCs) under the Paris Agreement. Similar challenges are emerging in Namibia, where communities and NGOs have raised alarms about land grabs, civic abuses, and the environmental footprint of seismic surveys.

The financial sector is also responding. Shell's $400 million write-down in 2025 for its PEL 39 block in Namibia reflects growing skepticism about the commercial viability of offshore projects. Investors are increasingly wary of stranded asset risks, particularly as global markets pivot toward decarbonization. This trend is mirrored in the cautious approach of Galp Energia, which has prioritized strategic partnerships to share exploration costs and mitigate risks in the Orange Basin.

Investor Confidence: Navigating Uncertainty

The interplay of regulatory and environmental risks is reshaping investor sentiment. While South Africa's UPRDA and Namibia's regulatory reforms aim to create a stable environment for exploration, the legal and reputational costs of non-compliance remain high. For example, TotalEnergies' 2023 greenwashing scandal in South Africa—where the company was penalized for misleading environmental claims—demonstrates the reputational vulnerabilities of operators in a region with a robust civil society.

Investors must also weigh geopolitical and market dynamics. South Africa's reliance on coal and its push for energy security through offshore oil create a tension between short-term economic needs and long-term climate goals. Meanwhile, Namibia's ambition to become a regional energy hub by 2029 hinges on attracting capital while balancing environmental stewardship. The success of projects like TotalEnergies' Venus field in Namibia will depend on their ability to align with global ESG benchmarks and secure financing in a market increasingly dominated by sustainability-focused investors.

Long-Term Viability: A Calculated Bet

For offshore oil investments in South Africa and Namibia to remain viable, operators must adopt a dual strategy:
1. Enhanced ESG Compliance: Companies must go beyond minimum regulatory requirements by integrating robust environmental assessments, community engagement, and climate risk mitigation into project planning. This includes investing in spill-response technologies and transparently reporting emissions.
2. Strategic Partnerships: Collaborations with local firms and international partners can help distribute financial and operational risks. For instance, Galp's pursuit of a partner for its Mopane field in Namibia reflects a pragmatic approach to navigating regulatory and environmental hurdles.

Investors should also monitor the pace of global energy transitions. While the Orange Basin's potential is undeniable, the long-term returns on offshore projects will depend on how quickly Africa's energy markets align with decarbonization trends. Diversifying into renewables and hydrogen—areas where TotalEnergies and Shell are already investing—could provide a hedge against fossil fuel volatility.

Conclusion: A Delicate Balance

The offshore oil sector in South Africa and Namibia stands at a crossroads. Regulatory reforms and environmental advocacy are creating a more transparent and accountable industry, but they also heighten the stakes for operators. For investors, the path forward lies in balancing the promise of hydrocarbon wealth with the realities of climate action and social responsibility. Those who navigate this complex landscape with agility and foresight may find opportunities in a sector poised for transformation.

In the end, the viability of offshore oil investments in Africa will hinge not just on the size of the reserves, but on the ability of governments, companies, and communities to build a sustainable energy future—one that reconciles economic growth with environmental integrity.