Shell is still looking for further opportunities in Namibia despite writing off $400 million from exploration activities offshore of the southern African country.
The company told Business Report today that although it had discovered hydrocarbons in the PEL0039 block, the discoveries “remain challenging due to resource mobility and permeability, and a high gas- to-oil ratio” that makes “extracting oil and gas harder” at the moment.
Moreover, “current market conditions, have not yet enabled clear commercial pathways that meet Shell’s investment criteria” and requirements.
Nonetheless, Shell and its partners in Namibia were now exploring other opportunities and pathways towards development of oil and gas offshore of Namibia.
“Together with our partners, we are continuing to explore potential commercial pathways to development, while actively looking for further exploration opportunities in Namibia,” a spokesperson for the company said.
Shell drilled six exploration and three appraisal wells across its PEL39 licence in Namibia.
“While we recognise that extracting the discovered resources presents challenges, the extensive data collected shows that there remain opportunities,” explained the company.
It further stated that it was mandated to classify the discovered resources as “commercial – non-viable” and take a write-off of the capitalized well spend for accounting purposes.
Shell’s PEL0039 license is a joint venture in which it holds a 45% stake as operator and also involves QatarEnergy with a participating interest of 45% and the National Oil Company of Namibia holding 10%.
Shell and its partners’ exploration activities were carried out in water depths of 2500 meters and more than 250 kilometers from shore.
According to the World Bank, oil exploration, the development of green hydrogen, and renewable energy offer opportunities for economic growth and job creation for Namibia.
Although Shell and TotalEnergies had announced discoveries of at least 11 billion barrels of light oil and 8.7 trillion cubic feet of gas in Namibia’s Orange basin as of August 2023, the oil major has now said that the discovered oil resources are not viable.
Development of the block and others would have required Namibia to “put in place a set of policies to make the most from increased revenues, while navigating successfully the risks associated with a large inflow of capital,” according to the World Bank.
Energy industry analysts and players said yesterday that the resources discovered by Shell offshore of Namibia were “currently not commercial” or viable.
“Shell had been quiet on them in 2024 and noted complexity and higher gas content recently,” said one analyst.
Shell, its partners QatarEnergy and the National Petroleum Corporation of Namibia (Namco), discovered hydrocarbons in block PEL39 in 2022. This discovery, along with a second by TotalEnergies in a nearby block, sparked colossal global interest in this southern African nation that has no oil or gas production.
Oil and gas insiders said yesterday that the announcement by Shell had been anticipated as it had “stopped drilling months ago” with the $400m write-down also largely unexpected.
Despite the excitement that had centered around the discoveries by Shell and TotalEnergies offshore of Namibia, experts from the World Bank also feared that this posed “challenges for macroeconomic management and possibly risks to the environment including the country’s robust fisheries sector, which is dependent on the unique biodiversity” under the Benguela Current.
BUSINESS REPORT