Shell’s announcement of a new discovery offshore Namibia promises to kickstart a whole new raft of exploration off the coast of the African country.
The oil giant and its partners, Qatar Energy and Namcor (the National Petroleum Corporation of Namibia) struck oil in the Graff-1 exploration well in both primary and secondary targets
Graff-1 well was drilled to a total depth of 5,376 metres in water depths of approximately 2,000 metres.
Shell has a 45% stake while QatarEnergy and Namcor hold a 45% and 10% interest respectively.
Namibia has long been touted as having the potential to become a major oil producer as it mirrors geology found in producing areas offshore Brazil, but a string of drilling programmes have almost universally been unsuccessful until now.
Activity has been disrupted by the covid pandemic, but with this news, exploration efforts are expected to ramp up again.
According to broker SP Angel :"The initial results from the Graff-1 well will have considerable positive read across to material licence holders offshore Namibia in our view. The result at Graff-1, therefore, reduces the risk of all leads which may rely on similar source rocks."
Shell is one of a number of companies operating in the country including fellow supermajor TotalEnergies, which has already made one big find offshore South Africa, and mid-sized independents such as Tullow, LekOil and Impact Oil and Gas.
Juniors also feature in several licences and the discovery by Shell is likely to lead to some hasty reassessments of the value of the acreage they hold.
Tower Resources, one of those with acreage off the Namibian coast, this morning made a public statement on the news.
"We are delighted by the Graff-1 discovery, for the Republic of Namibia and our partners at Namcor, and also for the greater confidence that this discovery gives us in our own Namibian Blocks,” said Tower chief executive Jeremy Asher.
“As Immanuel Mulunga, managing director of Namcor, has said, this should put to rest any remaining doubts about the hydrocarbon potential of Namibia.”
Tower has the third-largest net acreage position offshore Nambia, behind Exxon and AIM-market peer Eco Atlantic Oil & Gas.
Another potential beneficiary in AIM-listed Chariot Energy, though Shell’s news might receive a more ambiguous response than among its peers.
Chariot’s recent strategy has been to pivot away from oil and gas exploration towards more sustainable energy sources and in its accounts for 2021 it wrote down the value of its Namibian licences by US$51.1mln to nothing, which was a substantial hit for a company currently valued at £74mln.
At the time, it said it was waiting on the outcome of the Graff well and also the Venus well drilled by Total to give a boost to efforts to find a partner.
“We continue to mature our understanding of the potential of our Namibia acreage and host data rooms for potential farminees, whilst we await results from nearby drilling which may help to de-risk the remaining prospectivity in our Namibian exploration portfolio", it said last June.
Press reports suggested that Shell’s find contained a possible 250-300mln barrels of light oil in one 60-metre layer, which would be meaningful even for a company of its size.
The plan is to “continue evaluating the data and conduct further exploration activity to determine the extent of the system and how much of the hydrocarbons can be recovered,” it said.