After Shell, Chevron Announces No Commercial Hydrocarbons In Namibia

Chevron was not left too disappointed with the outcome, as it added that the well provided much information regarding the basin, and that further exploration will be carried out.

US oil-producing company Chevron announced on Wednesday, that it did not find any commercial hydrocarbon reserves in an exploration well situated in the Orange Basin region in Namibia. However, Chevron was not left too disappointed with the outcome, as it added that the well, which is called Kapana 1X has provided much information regarding the basin, and the company is sure that further exploration will be carried out.

In recent years, Namibia has become a hub for oil exploration, with several companies running to set up shop in this African country. The recent offshore finds in the country are some of the largest in this century. Companies such as Shell and Total Energies have made discoveries of approximately 2.6 billion barrels, and oil production is expected to begin around 2030. Reuters reported in June 2024 that Orange Basin has been the hotspot for oil discoveries, places such as Luderitz, Kavango, and Walvis basins have also been mapped out as potential sites for exploration.

Namibia’s national oil company (NAMCOR) signed a development deal with Chevron in April 2024, which entailed the US company taking an 80% working interest in an offshore bank in the Walvis Basin. NAMCOR and Custos Energy, a local Namibian company would each retain a 10% interest in petroleum exploration license 82.

While there was much excitement when companies began to flock to the southern African country, just last week Shell announced that would write down $400 million after an oil discovery was dubbed as commercially unviable. Shell confirmed the news in an interview with Reuters adding that it cannot presently confirm that the discovery of oil and gas resources in Namibia can be commercially developed.

It was Shell along with its partner QatarEnergy and NAMCOR which was the first to discover the presence of hydrocarbons in Namibia, which sparked global interest in the country, which until then did not have oil and gas production. Having drilled nine wells in the past three years, Shell announced in July that it had just completed drilling its fourth exploration well to much success, confirming the presence of hydrocarbons.

The British company was delighted with the results as of last year and was keen on exploring potential developments upon further evaluation. The company’s hopes were further heightened when the Namibian government approved Shell’s request to drill 10 other exploration wells. Shell had also reported the presence of 1.7 billion barrels of oil equivalent (boe) and other companies like TotalEnergies also estimated that there was a reserve of 3 billion boe.

However, despite these figures, the practicality of the situation seemed far more challenging for the British oil company. Shell reported that it encountered several technical and geological difficulties, attributing the lower permeability of the rocks for making it much harder to extract oil. Namibia’s acreage has also been described as highly challenging, slowing down the process. Reuters reported that certain sources had confirmed that the matter was further complicated as the offshore discoveries contained a higher content of natural gas than oil.

Shell has not yet thrown in the towel, as it released a statement detailing that they would continue to work with their partners to commercially develop Namibia’s oil extraction capabilities. The Namibian government refuses to view this as a setback, maintaining that they are optimistic that the other exploration campaigns will eventually allow them to commercialise the resource.

Stakeholders were reportedly disheartened with Shell’s write-down, however, the African Energy Chamber (AEC), which serves as the voice of the African energy sector, is echoing the sentiments of the Namibian government, describing this as a mere speed bump in the country’s road to oil development. Despite the challenges and setbacks, the openness and ease of business facilitated by the Namibian government in their bid to develop their oil and gas sector is bound to bring positive results in the following years.