Shell Writes Off $400 Million Oil Discovery in Namibia

Shell has announced that it will write down approximately $400 million over an oil discovery offshore Namibia that was deemed commercially unviable. This decision comes as a setback to Namibia’s aspirations of becoming a crude oil producer.

The oil giant stated that the discovered oil and gas resources in offshore block PEL39 in Namibia “cannot currently be confirmed for commercial development.” Shell, along with its partners QatarEnergy and Namibia’s national oil company, initially made the hydrocarbon discovery in block PEL39 in 2022. This, along with TotalEnergies’ discovery in a neighboring block, generated significant global interest in Namibia, a country that does not have its own oil and gas production.

Over the past three years, Shell drilled nine wells in the license, leading to several other discoveries. However, the company faced technical and geological challenges when it came to developing the resources. CEO Wael Sawan acknowledged the difficulties, citing the lower permeability of the rock as a hindrance to extracting oil and gas effectively.

During a trading update ahead of its fourth-quarter results on Jan. 30, Shell revealed that it expects to incur an exploration write-off of around $400 million related to the Namibian project. Additionally, the company will take a further $300 million write-off primarily linked to exploration licenses in Colombia.

Despite these setbacks, the oil and gas industry in Namibia continues to show promise, with other companies like Portuguese oil company Galp making significant discoveries in different offshore licenses. While Shell’s decision is a blow to the country’s ambitions, it highlights the challenges and uncertainties that come with exploration and production in the oil and gas sector.

As Shell navigates these write-offs and reassesses its exploration strategies, the industry will be closely watching how it adapts to the evolving landscape of energy production. Namibia, with its untapped potential, remains a focal point for future exploration endeavors, albeit with lessons learned from Shell’s experience.