Namibia wants to discuss a gas master plan with IOCs drilling oil exploration and appraisal wells that have struck substantial associated gas volumes as the African country seeks to reach first crude production before 2030, Minister of Mines and Energy Tom Alweendo was recently quoted in Abu Dhabi.
Ever since discoveries of light oil by TotalEnergies and Shell in Namibia’s Orange Basin made headlines in 2022, IOCs drilling wells offshore have had to grapple with difficulties extracting oil due to significant associated gas volumes at depths that can exceed 3,000 metres.
Alweendo made these comments to Petroleum Economist.
In January, Shell revealed it had taken a US$400m write-off on discovered resources deemed “commercially non-viable”, mostly for its oil finds in Namibia, a company spokesperson said. Shell had drilled nine exploration and appraisal wells over the last three years in the 12,000km² acreage of PEL0039, a joint venture (JV) with QatarEnergy and Namibia’s state-owned NAMCOR.
“The discoveries remain challenging due to resource mobility and permeability and a high gas-to-oil ratio,” the spokesperson said. “This, coupled with current market conditions, has not yet enabled clear commercial pathways that meet Shell’s investment criteria/requirements.”
“While we recognise that extracting the discovered resources presents challenges, the extensive data collected shows that there remain opportunities,” the spokesperson added. “Together with our partners, we are continuing to explore potential commercial pathways to development, while actively looking for further exploration opportunities in Namibia.”
Chevron, which signed a farmout deal in 2024 with NAMCOR to acquire an 80% stake in PEL82 in the Walvis Basin, also confirmed in January that the Kapana-1X exploration well, the only one it drilled in its PEL90 acreage in the Orange Basin, did not find “commercial hydrocarbons”, but provided “valuable information”.
“We are incorporating results and anticipate future exploration activity in Namibia,” a spokesperson said.
“They did not say they are walking away,” said Alweendo on Shell’s write-off. “They will continue to do whatever they think they can do and then hopefully somehow, some time, this year they will be able to figure out whether there is a way to still be able to extract this commercial quantity or not.”
Besides Shell, TotalEnergies and Chevron, other IOCs drilling wells are Portugal’s Galp and Azule Energy, the African JV between BP and Italy’s Eni.
Namibia wants to work with the companies on a gas master plan to address some of the difficulties with the substantial volumes of associated gas, as not all of it can be reinjected back into wells and will have to be monetised as feedstock for power plants and/or potentially via a floating LNG facility, said Alweendo.
“We cannot reinject gas forever,” said the minister. “So, we need to find a way how we can actually monetise the gas. Initially, probably, there will be reinjection, but eventually we are going to combine it into LNG and make it part of our energy mix.”
Namibia wants to create a gas master plan because almost all of the discoveries are in one location—the Orange Basin—and the country has banned gas flaring, the minister added.
So far, TotalEnergies is the only IOC that has talked about a potential FID, and it will make a decision this year on whether to move ahead with a development plan for its 2022 Venus discovery. TotalEnergies spent half of its 2023 exploration budget on Namibia and had planned to spend about 30% of the 2024 amount in the African country.
“If everything goes well with TotalEnergies, FID is likely to be this year and then first oil is likely to be 2028–29, with Venus,” said Alweendo. “Like any other plan, it can change.”
TotalEnergies was looking at producing 160,000b/d from Venus but has found a high gas-to-oil ratio at drilled wells and wants to make sure the project is within its “investment criteria, with a cost below US$20/bl”, CEO Patrick Pouyanne told investors in October last year.
“There is a material volume of oil,” said Pouyanne. “There is also quite a bit of gas that needs to be reinjected. And you need also the reservoir to absorb this gas.”
In January 2024, TotalEnergies increased its holdings in Block 2913B, which contains Venus, to 45.25% and in Block 2912 to 42.5%, after acquiring stakes from partner privately owned Impact Oil and Gas Namibia. Other shareholders in the JV are QatarEnergy and NAMCOR.
All four partners in PEL56 “are currently progressing with extensive post-well studies of the cores, logging data and fluid samples acquired from the Venus wells and will continue through 2025”, NAMCOR said in a statement in January 2024. “The JV is now progressing with fast-tracking the development studies of a potential Venus discovery.”
NAMCOR is a stakeholder in most exploration licences with IOCs, with its interest ranging mostly between 10% and 15%. The company is conducting inhouse geological, geophysical and engineering studies to enhance subsurface knowledge of the hydrocarbon prospectivity offshore and onshore Namibia to provide such information to potential investors, it added.
Namibia has yet to calculate out the extra capital needed to treat gas pumped with oil if IOCs decide to move from exploration to production. Dealing with high volumes of associated gas will entail larger capex for IOCs, which have certain cost of production thresholds.
“If it is going to be above the threshold, I guess we have to sit down and see what we do then,” said Alweendo. “We also do not know in a year or two what the gas price or cost is going to be like.”
Good news
Not all news emerging from IOCs’ drilling campaigns is gloomy. Australia’s Woodside said in January that it was evaluating seismic data received for PEL87, a block operated and majority-owned by Pancontinental Energy, to determine whether it will proceed with a farm-in option for at least a 56% stake in the Perth-based firm’s 75% interest in the offshore acreage on or before the 18 May deadline.
Galp, which has an 80% interest in PEL83 in the Orange Basin, said in December last year that it expects to drill its fifth well in its Mopane complex in January and simultaneously carry out a 3D seismic campaign as it continues to assess “the commerciality” of the discoveries. During the first nine months of 2024, Galp spent a quarter of its upstream capex in Namibia.
Galp, which drilled its first exploratory wells in Mopane in January 2024 and found gas-condensate deposits that mostly had high permeability and low CO₂ and H₂S content, created a buzz in Apil when it said the first phase of that exploration campaign indicated hydrocarbon in-place estimates of 10b boe or higher.
Eni, part of the Azule Energy JV with BP, is “optimistic” about plans to spud two wells in its PEL85 block and expects to have results of the first well by the first quarter of 2025, Guido Brusco, COO of global natural resources, said on the company’s Q3 earnings.
If plans to produce oil move ahead, Namibia will want NAMCOR to have a bigger stake in development agreements, but the ministry does not have any preference for any particular production model as long as it is fair, said Alweendo.