Niël Terblanché
Oil giant, Shell has dealt a severe blow to Namibia’s aspirations of becoming a crude oil producer by announcing plans to write off approximately US$400 million tied to its offshore oil discovery in block PEL39.
According to a statement published on the website of the African Emergency Council, the international oil company cited technical and geological challenges that rendered the resources commercially unviable for development.
“The discovered oil and gas resources in offshore block PEL39 in Namibia cannot currently be confirmed for commercial development,” the company said in its statement.
In the meantime, Shell’s partner in the venture, the Namibian Petroleum Corporation (Namcor) indicated that it did not receive any formal communication from the oil giant concerning the conclusive outcome on the commercial viability of Block PEL 39.
According to Utaara Hoveka, Namcor’s spokesperson, even though it had no foreknowledge of Shell’s decision, the state-owned company would not have any financial exposure even in the event of a non-commercial conclusion.
Hoveka stated that Namcor is a carried partner where all financial investments and risks are carried by the operator.
“Namcor is, however, convinced that Namibia is a rich under-explored oil province. With more hydrocarbon exploration activities, the country’s full petroleum potential will certainly be realised,” Hoveka said.
Shell’s announcement follows heightened global interest in Namibia’s potential as an oil-producing nation following the 2022 discovery of hydrocarbons in the block.
That discovery, along with another by TotalEnergies in a nearby block, had increased hopes for the country’s entry into the oil and gas industry.
Over the past three years, Shell and its partners, QatarEnergy and Nacor, drilled nine wells in PEL39 and made additional discoveries. However, the company has struggled to overcome geological hurdles.
On 31 October, Shell’s chief executive officer, Wael Sawan, informed analysts that the Namibian acreage posed substantial challenges.
He pointed to the lower permeability of the rock, which complicates the extraction process, and noted that the offshore reservoirs contained high levels of natural gas, further complicating development efforts.
Shell’s decision to abandon the prospect is part of a broader trend.
Alongside the write-off in Namibia, the company announced an additional US$300 million write-off linked to exploration licences in Colombia, reflecting a strategic shift in its approach to upstream investments.
The US$400 million write-off for Namibia was disclosed in a trading update ahead of the company’s fourth-quarter results, due on 30 January 2025.
Despite Shell’s decision, Namibia’s offshore potential continues to attract international attention. Recently, Portuguese oil company Galp announced a significant discovery in a different offshore license, underscoring the region’s appeal to global energy firms.
Namibia still does not have any active oil and gas production, but its offshore discoveries have raised hopes among residents that it would become a significant player in the global energy sector.
