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Shell’S Namibia Write Down: Windhoek Says It Will Work With “The Right Partners” To Develop Those Reserves

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Africa oil + gas report

Jan 10, 2025

Shell’S Namibia Write Down: Windhoek Says It Will Work With “The Right Partners” To Develop Those Reserves

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,”

Pipeline Gas Journal

Gazprom’S Grandeur Fades As Europe Moves Away From Russian Gas(Reuters) — When the CEO of Russian state gas giant Gazprom, Alexei Miller, opened a lavish Italian palazzo-styled building in central St. Petersburg to house the company's export arm 11 years ago, he augured a future funded by European sales. "This is symbolic," he said, referring to the modern new offices in Russia's most European city. "Europe will increasingly need Russian gas." Instead, the opulent offices have come to symbolize Gazprom's rapid decline, dragged down by the almost total loss of European markets after the war in Ukraine ruptured Russia's ties with the West. Reeling under multibillion-dollar losses and scrambling for savings, the company is now considering putting the palazzo up for sale along with other luxury properties it owns, according to a Gazprom executive and another source with knowledge of internal discussions at Gazprom. Gazprom is arguably the Russian business hardest hit by the international sanctions imposed after Russia's full-scale invasion of Ukraine three years ago. Although Russia's economy has been resilient, growing signs of strain have appeared in several industries. Reuters has previously reported that President Vladimir Putin is concerned as heavy military spending distorts the wider economy. The number of staff at Gazprom Export, once the most prosperous unit of the company, overseeing Soviet and Russia's gas sales to Europe for over half a century, has shrunk to just a few dozen employees, the same two sources told Reuters. That's down from 600 employees five years ago, at the peak of Russian exports to Europe. The possible sale of the building and cuts at the unit have not been previously reported. Gazprom's media department and the Russian energy ministry did not respond to detailed requests for comment on the story's findings. With no European sales, the remaining workers are focused mainly on litigation with former EU buyers, the sources told Reuters. Gazprom Export is "just a shell," one of the sources said. Alexei Grivach, from pro-Kremlin think tank the National Energy Security Fund, said Gazprom's less glamorous focus in the near future will be to bring gas to more Russian homes. "Gazprom has been handed the social task of gasification and secure gas supply to the economy and the population at low regulated prices," he said. Reuters spoke to three executives and half a dozen former and current employees for this story on the depth of change at what used to be Russia's most valuable company. All requested anonymity, citing fear of professional repercussions. Wider Cuts Gazprom's problems extend well beyond the export unit, the conversations with the employees reveal. Two of the sources told Reuters that Miller has now approved plans to cut 1,500 jobs at the parent company's headquarters in Russia and Europe's tallest skyscraper, the British-designed Lakhta Centre, also in St Petersburg. The dismissals at Gazprom headquarters have yet to be announced but staff have been asked to prepare individual presentations about why they should keep their jobs, according to one of the sources, who said employees were told to write up a description of their job functions in case of overlaps. The source said the process was expected to be completed within a few weeks. The cuts add up to about 40% of the staff at Gazprom's headquarters, but a small fraction of its half million strong work force, spread across Russia. Management misjudged how resolute European capitals would be, according to one of the executives, who said the thinking inside the company was that Europe would quickly be back "begging" for Russian gas supplies to resume. Despite the economic pain of higher energy costs, the EU has not rolled back sanctions. "We proved to be wrong," the executive said. U.S. gas exporters quickly moved to replace Russian gas in Europe. The U.S. has become the biggest exporter of LNG to the continent, with supplies tripling since 2021. Europe still buys Russia's sea-borne liquefied natural gas (LNG), but mainly from Gazprom's rivals, Novatek's NVTK.MM Yamal LNG plant. The European Union aims to end its use of Russian fossil fuels by 2027 and its overall gas consumption has decreased in part due to a shift to renewable energy sources. Last year, Gazprom posted a net loss of $7 billion for 2023, its first since 1999, the year Putin came to power. It posted another loss in the first 9 months of 2024, the latest period for which figures are available. Gazprom's share price fell in mid-December to its lowest since January 2009, touching 106.1 rubles, a decline of more than a third since the start of 2024. A few months after announcing the annual loss, Gazprom said last year it was selling a portfolio of high-end properties that include well-known luxury hotels in Moscow and in Armenia's Valley of Flowers. Gazprom has a long history of investing in luxury property, which it uses to reward employees with holidays, and to host conferences and events such as the 2014 Olympic Games. Trump Trade The return of Donald Trump to the White House has helped Gazprom's share price recover to around 180 rubles on hopes a swift Ukrainian peace deal would lead to the restoration of exports to Europe, Alpha Bank said in a note last month. However, there are few signs the continent will rush to again tie itself to Russian gas, despite a Financial Times report that a long-time ally of Putin is lobbying the United States to allow investors to restart the $11 billion Nord Stream 2 pipeline that carried gas from Russia via Germany. Germany says it will stick with its policy of independence from Russian energy. Even if there were appetite, Nord Stream is out of service and partly damaged. Cederic Cremers, executive vice president of integrated gas at Shell, said in late February at the International Energy week conference in London in response to whether Russian pipeline gas could return to Europe: "That depends on a lot of things." He cited multiple arbitration cases with Gazprom and asked "will customers and Europe still want the same dependence on Russian gas?" Gazprom's share in EU markets has shrunk to 7% from over 35% before EU sanctions, European Commission data shows. Its market capitalization as of Wednesday stands at around $46 billion, down from the all-time high of $330.9 billion in 2007, according to the Moscow stock exchange, Gazprom and Reuters calculations. Miller's Time As the company adjusts to its new role as a domestic gas supplier, the lofty ambitions of CEO Miller have been dashed. In 2007, Miller said the company would eventually have a market capitalization of $1 trillion. At the time this seemed possible. Russia holds a fifth of the planet's gas resources, rendering Gazprom the world's largest natural gas company by reserves. At its height, Gazprom - formed in the Soviet Union from the Ministry of the Gas Industry - generated revenues that accounted for over 5 percent of Russia's $2 trillion annual gross domestic product. The company has been run by Miller, a close friend of Putin since the Russian president was mayor of St Petersburg in 1990s, for the past 24 years. Miller has been on the U.S. sanctions list since 2018, barring U.S. citizens and entities from any dealings with him. Gazprom controls entire towns in Siberia and the Arctic such as Nadym where tens of thousands of employees and their families depend on it as the sole employer. Yury Shafranik, Russian fuel and energy minister from 1993 to 1996, told Reuters in 2023 that Gazprom had been a "state within a state." The sources Reuters spoke to did not describe plans for job cuts or the closure of production assets in such company towns. A Steppe Too Far? Putin's long-term promise to replace Europe's markets with exports to China look optimistic at best. Even the most ambitious projects currently being considered to pipe gas eastward would not amount to half of the previous annual peak exports of 180 billion cubic meters (bcm) Much of Russia's gas went through pipelines to Europe. When Germany and other European countries stopped buying it, there was nowhere else for the surplus to go. In contrast, Russia's oil exporters have been able to redirect tankers to refineries in Asian countries that have not imposed sanctions. Although gas production recovered slightly last year from a record low in 2023 on increased domestic demand and exports to China, there is little pipeline capacity to expand that trade. For now there is only one route for Russia to supply pipeline gas to China – the Power of Siberia pipeline, which transports 38 bcm per year. A second smaller pipeline with a capacity of 10 bcm per year is under construction, set to connect the Pacific island of Sakhalin to China by 2027. Russia and China have been in talks for over a decade about building a third pipeline, the Power of Siberia 2, to carry 50 bcm and meet over a tenth of Chinese gas consumption. This plan would take years to fully develop, and discussions have stalled due to price differences, according to media reports. In May, Russian Deputy Prime Minister Alexander Novak said Russia and China expected to a sign a contract "in the near future" on the Power of Siberia 2 gas pipeline. Putin and China's President Xi Jinping discussed Power of Siberia-2 in January, news agency Interfax reported, but no agreement has been reached. China National Petroleum Corporation, which is dealing with Gazprom, declined to comment on the talks. The government of Russia did not respond to a request for comment. Even if the Power of Siberia 2 pipeline were completed quickly, volumes and pricing terms are likely to be much lower than past exports to Europe, analysts from the Center on Global Energy Policy at Columbia University. "By 2030, Russian gas export revenues might fall by 55–80 percent compared to 2022, a year of record-high revenues for the Russian gas industry, at $165 billion," they said in a research note last year.

oil-gas

17 March 2025

Shell’S Namibia Write Down: Windhoek Says It Will Work With “The Right Partners” To Develop Those Reserves

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