Shell to write down $400m on unviable Namibian oil find

London — Shell plans to write down about $400m after it determined that an oil discovery off the coast of Namibia is commercially unviable.

The development is a blow to Namibia’s efforts to become an oil producer.

Shell said in a recent trading update ahead of fourth-quarter results on January 30 that 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 TotalEnergies’ discovery in a nearby block, sparked huge global interest in the country which has no oil and gas production.

Shell drilled nine wells in the licence 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.

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

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

The company said in the statement it expected to take an exploration write-off of about $400m, without providing details. It will take another $300m write-off related mainly to exploration licences in Colombia, the company said.

Reuters