Blow to Namibia: Shell to write down $400 million on oil discovery deemed commercially unviable

Shell will write down around $400 million over an oil discovery offshore Namibia it deemed commercially unviable.

This is a blow to the country’s efforts to become a crude producer.

Shell told Reuters this week that discovered oil and gas resources in offshore block PEL39 in Namibia “cannot currently be confirmed for commercial development”.

Shell and its partners, QatarEnergy and Namibia’s national oil company Namcor, first discovered hydrocarbon in block PEL39 in 2022, which together with another discovery TotalEnergies made in a nearby block, sparked huge global interest in the southern African country which has no oil and gas production.

Shell drilled nine wells in the licensed area over the past three years, making several other discoveries.

More recently, Portuguese oil company Galp also made a major discovery in a different offshore licence.

But the British company encountered technical and geological difficulties for the development of the resources.

Chief executive Wael Sawan told analysts on 31 October that Namibia’s acreage was “very challenging”, and that the lower permeability of the rock made extracting oil and gas harder.

Sources told Reuters that the offshore discoveries also had a high natural gas content, further complicating their development.

The company said in a trading update ahead of fourth-quarter results on 30 January that it expects to take an exploration write-off of around $400 million – without providing details.

It will take another $300 million write-off related mainly to exploration licences in Colombia, the company said. – Daily Maverick