Shell’s $400m write down 'not end of Namibia’s oil and gas dream', minister says

Windhoek is still exploring nuclear power for its long-term energy mix

Offshore rig for oil drill on the shore of Walvis Bay, Namibia. The country aims to commence its first oil production by 2029. Reuters

Shell’s decision to write down about $400 million for an offshore oil discovery in Namibia, which it deemed commercially unviable, is merely a “hump” in the Southern African nation’s oil and gas ambitions, according to its Energy Minister.

The British oil major and its partners, QatarEnergy and Namibia's national oil company, made their first hydrocarbon discovery in block PEL39 in 2022.

Alongside a discovery by TotalEnergies, this sparked significant global interest in Namibia, a country without existing oil and gas production.

Over the past three years, Shell has drilled nine wells in the licence, resulting in multiple discoveries.

However, the company is now facing technological challenges in developing the resources. Shell said that the oil and gas resources discovered in Namibia's offshore block PEL39 “cannot currently be confirmed for commercial development”.

Shell did not immediately respond to a request for comment.

Industry observers consider Shell's decision a setback for Namibia's ambition to emerge as a major regional oil producer. The country aims to commence its first oil production by 2029.

Tom Alweendo, Namibian Minister of Mines and Energy. Reuters

Despite the presence of resources in commercial quantities, the company has determined that, with its current technology, it is not economically feasible to extract them, Tom Alweendo, Minister of Mines and Energy of Namibia, told The National on Sunday on the sidelines of International Renewable Energy Agency (Irena) Assembly in Abu Dhabi.

“It does not mean that they are going to walk away from it, simply meaning that they have to figure out how [the resources] could be extracted in a more economical way [with the use of] better technologies,” he said.

“For us, we say, this is probably just a hump or a bump in the journey … we do not see this as the end of our dream to have oil and gas at some point.”

Namibia has been looking to invest in all forms of energy, including renewable power and, more recently, nuclear.

The country, one of the world’s largest uranium producers, has been seeking investments from China in nuclear, solar, and wind power. Chinese companies hold majority stakes in two of the country’s most productive uranium mines.

After a meeting with Chinese Foreign Minister Wang Yi last week, Namibian President Nangolo Mbumba was quoted by media as saying: “We want to add value to our uranium for the peaceful development of nuclear energy.”

Mr Alweendo said on Sunday that relying on renewable energy is insufficient for industrialisation, emphasising the need for a stable baseload power source, such as hydro, biomass, or nuclear.

Namibia is still in the early stages of considering whether nuclear power should be included as part of its long-term energy mix, he said.

The country’s domestic electricity supply has struggled to meet growing demand, with Namibia generating less than half of the energy it consumes. Historically, the country has depended on electricity imports from South Africa and other neighbouring countries, but South Africa's economic challenges have strained its domestic power generation, limiting its export capacity. Namibia’s power purchase agreement with South African utility company Eskom is set to expire this year.