In a significant blow to Namibia's efforts to establish itself as a crude oil producer, Shell (SHEL.L) has announced a $400 million write-down on its oil discovery offshore Namibia, deeming the resource commercially unviable.

The write-down pertains to oil and gas resources found in Block PEL39, where Shell, in partnership with QatarEnergy and Namibia’s National Petroleum Corporation, made its initial hydrocarbon discovery in 2022. The discovery, alongside a nearby find by TotalEnergies had generated global interest in Namibia’s offshore potential despite the country having no established oil production at the time.

However, despite drilling nine wells and making several finds over the last three years, Shell faced significant technical and geological challenges in Block PEL39. The company cited the lower permeability of the rock as a major obstacle to resource extraction, with CEO Wael Sawan describing the Namibian acreage as “very challenging” during an October 31st analyst call. Sources indicated that the high natural gas content of the discoveries further complicated commercial viability.

"While extracting the discovered resources presents challenges, the extensive data collected shows there remain opportunities," Shell said in a statement, adding that it is continuing to explore potential development pathways with its partners while seeking further exploration opportunities in Namibia.

Despite Shell’s write-down, Namibia’s Ministry of Mines and Energy remains optimistic. “It is not a setback. We are confident that the remaining potential of PEL39 and other exploration campaigns will lead to commercial developments,” the ministry emphasized in a statement.

Other global energy players, including Galp (GALP.LS), Chevron (CVX.N), Rhino Resources, and Azule Energy—a joint venture between Italy's Eni and BP are continuing exploration activities in the region. TotalEnergies is expected to make a final investment decision on the development of its highly anticipated Venus discovery by the end of the year.

In addition to its Namibia write-down, Shell's trading update ahead of its Q4 results set for January 30th disclosed an additional $300 million write-off related primarily to exploration licenses in Colombia.

Namibia’s vast offshore prospects remain a key focus in Africa’s upstream oil and gas sector, with industry stakeholders watching closely as exploration continues and final decisions on major discoveries unfold.

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