Raffik Lazar
Last month Shell’s decision to write off its 400 million USD exploration investment in PEL39 and failure to find commercial hydrocarbon in a high-profile exploration well in PEL90 by a Chevron-led consortium, have left some wondering about the viability of the petroleum potential in the offshore Namibia Domain.
While previous successes bolster positive sentiment and generate enthusiasm, the reverse is certainly not true. Let’s start by stating the obvious: the recent years exploration activities in the Offshore Namibia domain prove that the potential is present and the discovered barrels did not disappear with Shell decision. Rather it reflects two key elements in petroleum offshore journey:
Deepwater offshore developments are not for the faint hearted. Billions of dollars investment is required in order to counter the harsh and unforgiving environment of operations. Cutting edge equipment and high value processes are vital to convert the potential into actual value. In some sense, developing offshore resources is not a slam dunk and can be seen as a technological prowess.
It’s a normal occurrence to have players come and go as their risk reward profile might not align with the complexity of the deepwater offshore environment. In the case of Shell, other non-technical parameters related to its current financial position and its risk averse profile may have pondered in the decision.
Shell’s decision does not mean that Namibia offshore petroleum is doomed to fail, rather it is reflecting Shell’s admission of its inability to make it fly under its current understanding and capabilities.
Like in most similar cases, a new player will emerge in the equation and build upon the extensive database acquired by Shell that includes nine exploration and appraisal wells and world class seismic 3D dataset to make it work.
Synergies with nearby PEL operators, replicating deepwater offshore best practices that have been polished during decades of worldwide operations, developing a vibrant local service company ecosystem, adopting supportive fiscal terms and acquiring more subsurface data are the main ingredients for success.
If anything, the recent development in the offshore Namibia scene does not reduce the transformative potential of its petroleum resources. Some hiccups are bound to happen in the journey to become an oil producing country. In the future, January 2025 will just appear as a blip in Namibia petroleum journey.
About the author: Raffik Lazar is the global coordinator and subsurface consultant at The Dubai Dataroom with 20 years of oil industry experience. He looks at key energy projects around the globe and propose technical / economical analytics solutions.
