By Marshal Gungubele

The Namibian government responded in less than 24 hours to reports that Shell would take exploration well write-offs of about $400Million mainly concerning some of its discoveries in the country.

In a 1,000 word, two page statement, released around 6pm Thursday, January 9, 2025, the Ministry of Energy and Mines allowed  that the UK major’s decision would not significantly impact Namibia’s oil and gas development.

“It is not a setback. We are positive that the remaining potential of Petroleum Exploration Licence (PEL) 39 and other exploration campaigns will translate into commercial developments”, the statement, bearing the Ministry’s letterhead, in pdf format, remarked.

“We have reported that the size of the Namibian prize has been smaller for the company, than its European rival TOTAL. Shell’s Graff and Jonker accumulations have respectively been reported by the Ministry of Mines and Energy as holding between 250Million and 400Million barrels of oil estimated recoverable reserves each, whereas the same authorities have been on record as saying that TOTAL’s Venus discovery holds in excess of 2Billion barrels of oil. Venus is now the centre piece of the French major’s regionwide exploration and development effort in Southern Africa, including neighbouring South Africa.”

“Advances in technology, coupled with further geological and geophysical studies are expected to provide deeper insights and unlock the full potential of these resources. The collective discoveries from the nine drilled wells amount to significant volumes of hydrocarbons accumulations. The government of Namibia remains committed to developing these discoveries, which are believed to be commercially viable. We are dedicated to progressing these opportunities with the right partner and right investment commitment”, the statement added.

The Ministry clarified that the write down does not cover the entire licence that Shell is operating. “Shell will write down $400Million on an oil discovery made in PEL 39 in accordance with the company accounting principles. The discoveries were considered commercially unfeasible, with Shell citing technical and geological challenges. However, together with their partners Qatar Energy and Namcor, Shell will continue to explore potential commercial pathways to development, while actively looking for further exploration opportunities in PEL39.

“While initial assessments of some of the subsurface parameters indicated challenges related to subsurface complexities and reservoir quality, there is significant potential for improvement as exploration and technical analysis continues”, the Namibian government declared.

What may have alarmed Windhoek about Shell’s write down is that the UK major was the first operator to announce a sizeable discovery, in what has become known as the Namibian rush. “In early 2022 Shell electrified the world’s oil industry with their announcement of the discovery of light oil and associated natural gas in the Graff-1X exploration well in the deepwater Orange Basin”, the Canadian geologist Tako Koning wrote in a very comprehensive article on this website.  Shell is operator with a 45% working interest and partners include Qatar Energy with 45% and Namcor, the national oil company of Namibia with 10%.  The reservoirs are Upper Cretaceous marine sandstones.

Shell has drilled eight wells since the Graff-1 find. But, we have also reported that the size of the prize has been smaller for the company, than its European rival TOTAL. Shell’s Graff and Jonker accumulations have respectively been reported by the Ministry of Mines and Energy as holding between 250Million and 400Million barrels of oil estimated recoverable reserves each, whereas the same authorities have been on record as saying that TOTAL’s Venus discovery holds in excess of 2Billion barrels of oil. Venus is now the centre piece of the French major’s regionwide exploration and development effort in Southern Africa, including neighbouring South Africa.

The government’s statement summarised other companies’ campaigns in the country: “TOTALEnergies, for example, is making progress with its multi-well appraisal and exploration drilling campaign in Block 2913B, situated in PEL 56. The company aims to make a Final Investment Decision in 2025, with first oil targeted for 2029. Concurrently, Galp seeks to bring in another partner on the Mopane complex, following two discoveries at the Mopane-1X and its successful appraisal in Mopane-2A well in 2024. The Mopane complex in PEL 83 alone has been cited having the potential to contain significant volumes of hydrocarbons in place.

“Rhino Resources, in partnership with Azule Energy, NAMCOR and Korres Investments – are busy drilling the first of the two high-impact wells at PEL 85 currently, while Petrobras is seeking farm-in opportunities offshore. At the same time, drilling activities are underway for the Kapana 1X well by Chevron and its joint venture partners Namcor and Trago in PEL90.

“Following its acquisition of an 80% operated interest in PEL 82, Chevron is seeking playopening discoveries within the Walvis Basin. PEL 82 features more than 3,500 km² of 2D and 9,500 km² of 3D data. Additionally, Woodside Energy gained the rights to PEL 87 3D seismic data in 2024 which will further test the additional opportunities within the prolific Orange Basin. “These investments signal a strong commitment by leading international oil companies to unlock the full potential of Namibia’s offshore acreage. While the Shell write down is unfortunate, the Ministry of Mines and Energy believes that we have barely begun to scratch the surface of the country’s offshore resources.

“The Namibia government will continue working with dedicated companies to develop these resources and our plan to first oil are still on track. We remain confident that ongoing exploration efforts will reveal commercial opportunities and look forward to delivering first oil production in the near future,”