Global energy giant Shell will write down around $400 million over an oil discovery offshore Namibia that it deemed commercially unviable, in a blow to the southern African country’s efforts to become a crude producer.
The multinational said the decision was made after the discovery encountered technical and geological challenges, including high gas levels.
Namibia is not yet producing oil, but its oil discoveries are boosting its future. So far, proven reserves are estimated at $2.6 billion.
Depsite, the decision by Shell, the Namibian authorities remain resolute that the country’s oil production aspiration remain unhinged.
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Namibia’s Ministry of Mines and Energy said in a statement on Thursday that Shell’s decision will not significantly impact Namibia’s oil and gas development.
“It is not a setback. We are positive that the remaining potential of PEL39 and other exploration campaigns will translate into commercial developments,” the ministry said.
“While Shell’s record is unfortunate, the Ministry of Mines and Energy believes that we have only just begun to explore the surface of the country’s offshore resources,” Namibia’s Minister of Mines and Energy Tom Alweendo added.
“No need to be afraid.” Exploration work is ongoing in these blocks, with plans to integrate the discoveries with other discoveries in the basin. “It is important to note that these blocks are very large, covering an area of 10,000 square kilometres, which is larger than the area of some countries,” NJ Ayuk, President of the African Energy Chamber, said in a message.
Shell’s decision comes when various national companies are investing heavily in Namibia’s oil potential. Total Energy SA has two licenses for offshore areas.
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The company is expected to make a final investment decision in 2025, with an estimated start date of 2029.The possibility of African countries becoming oil and gas producers.
