Shell Writes Down $400 Million on Namibian Oil Discovery

UK-headquartered energy giant Shell has decided to write down $400 million, citing technical and geological difficulties encountered at the petroleum exploration license (PEL) 39, as its oil discovery in the Orange Basin off the coast of Namibia cannot be confirmed for commercial development at this point.

Since the initial discovery at the Graff-1X well in 2022, Shell has drilled eight wells, including La Rona-1, Jonker-1, Graff-1A, Lesedi-1X, Cullinan-1X, Jonker-1A, Jonker-2A, and Enigma-1X, with various of these wells encountering hydrocarbons in PEL 39, which is situated 250 kilometers in deep offshore acreage, comprising an area of more than 12,000 square kilometers.

According to Namibia’s Ministry of Mines and Energy, Shell has run into technical and geological difficulties in PEL 39, leading to the determination that discoveries in some drilled wells were not viable for commercial development. As a result, the firm will write down $400 million on an oil discovery made in this license.

Potential for Improvement

While initial assessments of some subsurface parameters indicated challenges related to subsurface complexities and reservoir quality, the ministry sees significant potential for improvement as exploration and technical analysis go on, with advances in technology, coupled with further geological and geophysical studies, anticipated 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,” outlined Namibia’s Ministry of Mines and Energy.

Continued Exploration Efforts

Shell, together with partners, QatarEnergy and Namcor, will continue to explore potential commercial pathways for development while actively looking for further exploration opportunities in PEL 39. The Namibian ministry claims that the country still offers substantial potential in the offshore Orange Basin, as evidenced by projects such as TotalEnergies’ appraisal campaign in PEL 56.

The French energy giant is making progress with its multi-well appraisal and exploration drilling campaign in Block 2913B, situated in PEL 56, aiming to make a final investment decision in 2025, with the first oil targeted for 2029. On the other hand, Galp seeks to bring in another partner on the Mopane complex, following two discoveries at the Mopane-1X and appraisal in the Mopane-2A well in 2024.

Unlocking Namibia’s Offshore Resources

The African country’s ministry underlines that the Mopane complex in PEL 83 has the potential to contain significant volumes of hydrocarbons in place. Rhino Resources, in partnership with Azule Energy, NAMCOR, and Korres Investments, is busy drilling the first of the two high-impact wells at PEL 85, while Petrobras is seeking farm-in opportunities offshore. In addition, drilling activities are underway for the Kapana 1X well, which Chevron and its joint venture partners, NAMCOR and Trago, have embarked on in PEL 90.

Following its acquisition of an 80% operated interest in PEL 82, Chevron is seeking play-opening discoveries within the Walvis Basin. The license features over 3,500 square kilometers of 2D and 9,500 square kilometers of 3D data. In addition, 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.

Namibia’s Commitment to Oil Development

Tom Alweendo, Namibia’s Minister of Mines and Energy, outlined: “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 governement 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.”

Positive Outlook for Namibia’s Oil Sector

With this in mind, the Ministry of Mines and Energy highlights that Shell’s decision to write down the discoveries will not significantly impact Namibia’s oil and gas development. While stakeholders reportedly describe the write-down as “a blow to the country,” the African Energy Chamber (AEC), which serves as the voice of the African energy sector, considers this to be “merely a speed bump in Namibia’s oil development rather than a roadblock.”

Along those lines, the Namibian Ministry of Mines and Energy emphasized: “It is not a setback. We are positive that the remaining potential of PEL39 and other exploration campaigns will translate into commercial developments. Shell’s discoveries in PEL 39 represent just some of the many exploration milestones witnessed offshore Namibia since 2022.”

AEC claims that Namibia still offers “significant potential in the offshore Orange Basin and beyond, underscored by the positive exploration campaigns currently underway.” While recognizing that subsurface complexities may exist, the African Energy Chamber perceives the current findings across the country to still be promising.

NJ Ayuk, Executive Chairman of the AEC, noted: “There is no need for alarm. Exploration in these blocks is ongoing, and discoveries may need to be tied in with other finds within the basin. It’s worth noting that these blocks are massive, spanning up to 10,000 square kilometers – larger than some countries. Shell and other operators have only scratched the surface of the vast exploration opportunities available in Namibia.

“The country’s oil and gas story is still unfolding, and there’s so much more to come. The government has been a strong supporter of investment into the oil sector and has created a stable climate that makes Namibia a go-to destination for investors.”

Exploration Potential in Namibia

The AEC believes that reservoir quality is expected to improve further north; thus, an in-depth analysis of the data by the exploration team could uncover opportunities for a gas strategy, potentially revealing new possibilities. It also adds that the Orange Basin, and its northern areas in particular, are perceived to still hold “significant exploration prospects with potential for commercially viable discoveries.”

The African Energy Chamber elaborated: “Leading international oil companies and independents continue to position the basin as one of the most sought-after exploration hotspots, with various exploration campaigns expected to yield strong results. The Orange Basin is believed to be rich in oil, with promising exploration opportunities in the north. Gas prospects are also prolific, underscoring the future potential and emerging growth opportunities present in the basin.

“However, Namibia’s oil potential doesn’t end with this basin. Beyond the Orange Basin, Namibia’s on- and offshore acreage offers high potential for impactful discoveries, particularly in basins such as Walvis, Kuene, Kavango, and Namibe. The Walvis Basin covers an area of 17,295 km² and serves as one of the most prolific gas provinces worldwide, and various companies are engaged in exploration activities.”

Continued Exploration Activities

While Eco Atlantic is assessing opportunities for development in PEL 97, PEL 98, PEL 99, and PEL 100, Tower Resources is conducting an oil seep analysis and review of existing volumetric data on existing prospects and leads in Block 1910A, 1911, and 1912A, as it has identified the presence of multi-billion barrels of oil structures.

Additionally, Global Petroleum, which renewed its license for PEL 94 to September 2025, aiming to acquire, process, and interpret 2,000 kilometers of 3D seismic data, also plans to drill one well.