Shell Writes Down $400 Million on Namibian Orange Basin Lease

After three years and nine exploration wells, Shell has decided to write down the value of its lease area in Namibia’s Orange Basin by $400 million. The decision comes after encountering geological challenges and technical difficulties during the drilling campaign, including low permeability in the formation, making extraction difficult.

While Shell has discovered oil in more than one well in the block, the company has determined that the prospects “cannot currently be confirmed for commercial development.” Despite this setback, Namibia’s energy ministry remains optimistic about the basin’s potential, stating that the collective discoveries from the drilled wells amount to significant volumes of hydrocarbon accumulations.

Namibian energy minister Tom Alweendo reassured that Shell is not walking away from the project but is exploring more economical ways to develop the resource in the future. He emphasized that the write-down was unfortunate but mentioned that exploration and production efforts in Namibia’s offshore areas are still in their early stages.

Exploration Opportunities in Namibia

While Shell faces challenges in the Orange Basin, other companies like TotalEnergies, Woodside, Rhino Resources, Chevron, Namcor, and Trago are actively exploring nearby lease areas in Namibia. TotalEnergies is currently conducting an appraisal campaign in PEL 56, showing promising results.

Galp’s Mopane prospect in PEL 83 is also considered commercially viable, with the company seeking a partner for market development. The Namibian government remains committed to working with dedicated companies to develop offshore resources and aims to achieve first oil production in the near future.

Potential in Namibian Offshore Basins

The African Energy Chamber highlights the potential of the Orange Basin’s northern end for gas reserves that could be commercially viable. Additionally, the Walvis Basin, another offshore region in Namibia, shows strong potential for gas development, indicating promising prospects for the country’s energy sector.