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Shell writes down $400 million on Namibia oil discovery

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Technical challenges hinder Shell's Namibia oil

development

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Namibia remains optimistic about future oil exploration

(Updates January 8 story with Shell comment in paragraph 8,

ministry statement 11-12, and background in 13)

By Ron Bousso

LONDON, Jan 8 (Reuters) - Shell will write down

around $400 million over an oil discovery offshore Namibia that

it deemed commercially unviable in a blow to the southern

African country's efforts to become a crude producer.

Shell told Reuters that discovered oil and gas resources in

offshore block PEL39 in Namibia "cannot currently be confirmed

for commercial development."

Shell and its partners, QatarEnergy and Namibia's national

oil company, first discovered hydrocarbon in block PEL39 in

2022, which together with another discovery TotalEnergies

made in a nearby block sparked huge global interest in

Namibia which has no oil and gas production.

Shell has drilled nine wells in the licence over the past

three years, making several other discoveries.

More recently, Portuguese oil company Galp also

made a major discovery in a different offshore licence.

But the British company encountered technical and geological

difficulties for the development of the resources.

"While we recognise that extracting the discovered resources

presents challenges, the extensive data collected shows that

there remain opportunities. Together with our partners, we are

continuing to explore potential commercial pathways to

development, while actively looking for further exploration

opportunities in Namibia," Shell said in a statement on

Thursday.

CEO Wael Sawan told analysts on Oct. 31 that Namibia's

acreage was "very challenging," and that the lower permeability

of the rock made extracting oil and gas harder.

Sources told Reuters that the offshore discoveries also had

a high natural gas content, further complicating their

development.

Namibia's Ministry of Mines and Energy said in a statement

on Thursday that Shell's decision will not significantly impact

Namibia's oil and gas development.

"It is not a setback. We are positive that the remaining

potential of PEL39 and other exploration campaigns will

translate into commercial developments," the ministry said.

Galp, Chevron ( CVX ), Rhino Resources and Azule Energy, a

joint venture between Italy's Eni and BP, are

all planning to drill exploration wells in Namibia this year.

TotalEnergies plans to make a final investment decision on the

development of its Venus discovery by year-end.

Shell said in a trading update ahead of fourth quarter

results on Jan. 30 that it expects to take an exploration

write-off of around $400 million, without providing details.

It will take another $300 million write-off related mainly

to exploration licences in Colombia, the company added.