Shell’s $400 million write-down and departure from Namibia’s offshore oil and gas exploration blocks has dented the southern African country’s hopes for an economic boost from investment inflows and employment that had been expected should the discoveries have proven viable.
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 were not viable.
After Shell said this week that “exploration well write-offs are expected to be $400 million” for the quarter to December 2024, the company has been quoted by Reuters saying the oil and gas reserves discovered in Namibia's offshore block PEL39 “cannot be commercially developed” at the moment.
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.
Shell has drilled nine wells on the licence in three years. There are many other discoveries; recently, Portuguese oil company Galp also started to make a major discovery in a different offshore licence.
Namcor said yesterday though that it would not incur any financial losses from Shell’s departure from the oil blocks.
“As a carried partner, Namco would not face any financial exposure in the event of a non-commercial conclusion. All financial investments and risks are borne by the operator,” said Utaara Hoveka, public relations specialist for Namco.
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.
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