Namibia’s oil dreams face reality check after Shell write-off
Down, not out
Shell's U$400M write-off doesn't derail Namibia's oil hopes, says Wood Mackenzie
Namibia's aspirations of becoming a major oil producer have encountered a significant hurdle after Shell wrote off US$400 million related to an unsuccessful well in the Orange Basin. However, despite this setback, energy consultancy firm Wood Mackenzie (Woodmac) believes that Namibia's oil prospects are not entirely dashed, and other companies are making progress.
“Exploration is fraught with risk – technical success rates average below 40% globally. For frontier basins the risks are greater with lower technical and commercial success rates relative to established and mature basins,” Woodmac said.
According to Woodmac, Namibia has demonstrated strong technical capabilities in its oil exploration efforts, but achieving commercial viability is proving difficult.
“Namibia stands out with a high technical success rate, but commercial success is now looking like a real challenge. While the Cretaceous deepwater turbidite clastic play is effective in the Orange Basin, well-level risks, such as reservoir complexity and distribution, have to be taken into account,” the firm said.
Down, but not out
Despite the write-off by Shell, Woodmac was positive the oil company would not entirely withdraw from Namibia.
“We think Shell will probably hold on to its Orange Basin acreage, awaiting results from other wells. In Namibia, it may let the blocks lapse, but in South Africa, it is likely to retain and possibly extend its blocks, gathering more data from ongoing and planned wells to better understand the basin’s geology,” Woodmac said.
“Shell’s downgrade of its Namibian deepwater oil discoveries may be a setback, but it does not necessarily spell the end of subsurface exploration in the Orange Basin for the Oil Major or Namibia. Wood Mackenzie’s analysts have used the Lens Subsurface platform to take a look at the acreage in question, Shell’s drilling campaign and what this disappointment is likely to mean for the wider Orange Basin,” it added.
More exploration work was also still going to be carried out in the Orange Basin by oil companies.
“The recent setback will not necessarily derail the exploration campaign or damage the perceived prospectivity of other Orange Basin blocks. Different parts of the basin have different geology,” Woodmac said.
Namibia was anticipated to become an oil producer, Woodmac said.
Namibia will still become a deepwater oil producer in the coming years, in our view; it just won’t be from Shell’s licence area. TotalEnergies and Galp have had more luck, discovering larger volumes and better-performing wells. Commerciality is looking much more likely.
“Exploration is fraught with risk – technical success rates average below 40% globally. For frontier basins the risks are greater with lower technical and commercial success rates relative to established and mature basins,” Woodmac said.
According to Woodmac, Namibia has demonstrated strong technical capabilities in its oil exploration efforts, but achieving commercial viability is proving difficult.
“Namibia stands out with a high technical success rate, but commercial success is now looking like a real challenge. While the Cretaceous deepwater turbidite clastic play is effective in the Orange Basin, well-level risks, such as reservoir complexity and distribution, have to be taken into account,” the firm said.
Down, but not out
Despite the write-off by Shell, Woodmac was positive the oil company would not entirely withdraw from Namibia.
“We think Shell will probably hold on to its Orange Basin acreage, awaiting results from other wells. In Namibia, it may let the blocks lapse, but in South Africa, it is likely to retain and possibly extend its blocks, gathering more data from ongoing and planned wells to better understand the basin’s geology,” Woodmac said.
“Shell’s downgrade of its Namibian deepwater oil discoveries may be a setback, but it does not necessarily spell the end of subsurface exploration in the Orange Basin for the Oil Major or Namibia. Wood Mackenzie’s analysts have used the Lens Subsurface platform to take a look at the acreage in question, Shell’s drilling campaign and what this disappointment is likely to mean for the wider Orange Basin,” it added.
More exploration work was also still going to be carried out in the Orange Basin by oil companies.
“The recent setback will not necessarily derail the exploration campaign or damage the perceived prospectivity of other Orange Basin blocks. Different parts of the basin have different geology,” Woodmac said.
Namibia was anticipated to become an oil producer, Woodmac said.
Namibia will still become a deepwater oil producer in the coming years, in our view; it just won’t be from Shell’s licence area. TotalEnergies and Galp have had more luck, discovering larger volumes and better-performing wells. Commerciality is looking much more likely.
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