Shell has announced it will write down approximately $400 million following its decision to deem an offshore oil discovery in Namibia commercially unviable.
This setback deals a blow to the southern African nation’s ambitions to become a crude oil producer.
The company informed Reuters that the oil and gas resources discovered in offshore block PEL39 “cannot currently be confirmed for commercial development.”
Shell and its partners, QatarEnergy and Namibia’s national oil company, initially discovered hydrocarbons in block PEL39 in 2022.
This, along with a separate discovery by TotalEnergies in a nearby block, generated significant global interest in Namibia, a country with no current oil and gas production.
Shell has drilled nine wells in the area over the past three years, making several additional discoveries. More recently, Portuguese oil company Galp also made a major find in a different offshore license.
However, Shell encountered various technical and geological challenges that hindered the commercial development of these resources.
CEO Wael Sawan highlighted the “very challenging” nature of Namibia’s acreage, noting that the lower permeability of the rock made extraction of oil and gas more difficult.
Sources also revealed that the offshore discoveries contained a high proportion of natural gas, further complicating their development.
In a trading update ahead of its fourth-quarter results on January 30, Shell confirmed it expects to write off around $400 million related to exploration activities in Namibia.
The company also plans an additional $300 million write-off, primarily associated with exploration licenses in Colombia.
