Why Oil Majors Drifting Away from Namibia Discoveries

Satyesh Bhandari

Namibia has made significant oil and gas discoveries in recent years, particularly by Shell and Total in the Orange Basin. However, recently, Shell has downgraded its deepwater oil discoveries in Orange basin in Namibia, most probably due to economic reasons as development cost is very high.

Shell operates two offshore blocks in Namibia's Orange basin. It has drilled a total of nine exploration and appraisal wells to explore three different plays. Out of that only one exploration well resulted in a dry hole. It focused on the carbonate build-up. ?Shell’s exploration campaign was intense but to cover all possible plays.

Although Namibia stands out with a high technical success rate, but commercial success is looking like a real challenge.

Despite several promising finds, there are many factors that might be slowing down investor interest in Namibia for E & P sector.

1. Regulatory and Policy Uncertainty

• Investors are wary of unclear or evolving policies on resource taxation, local content requirements, and production-sharing agreements.
• Namibia is still refining its petroleum laws, leading to uncertainty about fiscal terms.

2. Infrastructure Challenges

• Namibia lacks key infrastructure like pipelines, refineries, and processing plants, making extraction and export costly.
• Ports and logistics require significant investment to handle large-scale oil production.

3. High Exploration and Development Costs

• Deepwater drilling, where most discoveries have been made, is very expensive.
• The industry is capital-intensive, and companies may be cautious about committing large sums before clear commercial viability is proven.

4. Long Development Timelines

• Turning discoveries into production can take years, sometimes a decade or more.
• Investors seeking quicker returns may hesitate to commit.

5. Global Energy Transition & ESG Concerns

• Many investors are shifting towards renewable energy, reducing their appetite for new fossil fuel projects.
• Environmental, social, and governance (ESG) concerns could limit funding from sustainability-focused institutions.

6. Limited Local Expertise & Workforce

• Namibia has a small oil and gas sector, requiring significant investment in skills development and training.
• Companies may need to rely heavily on international expatriate in the early stages.

7. Market & Geopolitical Risks

• Oil prices fluctuate, affecting investment decisions.
• Competition with more established African oil producers like Angola and Nigeria could divert investor interest.

8. Unproven Commercial Viability

• While discoveries are promising, full-scale commercial production has not yet started.
• Investors prefer proven reserves with established production before committing large-scale funding.

For Namibia to attract more investors, it may need to clarify its regulations, develop supporting infrastructure, and provide investor-friendly fiscal terms. Would you like insights on how Namibia could improve its attractiveness to investors?