The oil industry has found its newest exploration hotspot offshore Namibia. The high success rate of drilling and appraisal activity offshore Africa's southwestern coast is spurring Big Oil to boost acreage in the area and seek other exploration frontiers.
After years of muted interest in high-impact frontier exploration due to the budget austerity after the 2015-2016 crash and the crash in demand during Covid, major international oil firms and their smaller junior partners are ramping up exploration again, hoping to find the next Guyana, where Exxon and Hess have discovered more than 11 billion barrels of oil in place.
Namibia Success
Offshore Namibia, the success rate in discoveries has been phenomenal so far—companies have confirmed 15 discoveries of commercial volumes of oil or gas out of 17 exploration wells drilled since February 2022, the Financial Times notes.
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Of course, it cannot be expected that the success rate will continue to be so high going forward as more wells are being drilled and appraised. But the excitement that Namibia has generated in the industry could prompt Big Oil to boost exploration in other areas, too, according to FT.
Namibia is a key exploration target for supermajors Shell and TotalEnergies, and Portugal-based Galp.
TotalEnergies and Shell have already made large discoveries offshore Namibia, kicking off the Namibian oil rush in 2022.
TotalEnergies made a significant discovery of light oil with associated gas on the Venus prospect in the Orange Basin in early 2022. Venus in Namibia could be a "giant oil and gas discovery," the French supermajor said in an investor presentation in September 2022.
Over the past two years, Shell has made four oil and gas discoveries in the Orange Basin offshore Namibia.
Last summer, Zoë Yujnovich, Integrated Gas and Upstream Director at Shell, said on Shell's Capital Markets Day that the supermajor would continue with its exploration efforts after the success in the Orange Basin in the past two years.
"What we're most pleased about in Namibia is that we have so far out of the three exploration wells and the one appraisal well that we have drilled, we have had top-quartile well-performance in every single one of our activities in Namibia," Yujnovich said.
Early this year, Galp confirmed the discovery of a significant column of light oil in reservoir-bearing sands of high quality, after drilling the first exploration well in block PEL83 offshore Namibia.
Galp's partner in the block, Sintana Energy, said at the end of January that Galp discovered a second significant column of light oil in reservoir-bearing sands of high quality. The block, PEL 83, is located immediately north of PEL 39, home to Shell's basin opening discoveries at Graff-1, La Rona-1, and Jonker-1. It is also located north and west of PEL 56 where TotalEnergies announced its giant oil discovery at Venus-1.
At another block, PEL 90, U.S. supermajor Chevron applied in November for an Environmental Clearance Certificate, which would provide for the drilling of up to 5 exploration and 5 appraisal wells beginning in the fourth quarter of 2024.
In January this year, TotalEnergies signed agreements to raise its interests in two blocks it already operates offshore Namibia.
Exploration Extends to Other Offshore Areas
This week, TotalEnergies and QatarEnergy said they were expanding their efforts to explore for oil and gas in the Orange Basin offshore Namibia by acquiring a nearby license in the basin in South African waters.
"Following the Venus success in Namibia, TotalEnergies is continuing to progress its Exploration effort in the Orange Basin, by entering this promising exploration license in South Africa", said Kevin McLachlan, Senior Vice-President Exploration of TotalEnergies.
Despite still uncertain development designs, timing, and production levels, Wood Mackenzie estimates that Namibia's oil economics could be robust, with net present value (NPV) remaining positive even at oil prices as low as $40 per barrel.
"Overall, we see Namibia as an emerging core region for the Majors, with expected NPV for projects giving them the potential to become crown jewel assets for several big operators," Ian Thom, Research Director, Upstream, at WoodMac, wrote in November.
Success in Namibia and European Big Oil's pivot back to its core business of providing oil and gas from profitable projects are incentivizing more exploration activity.
UK supermajor BP is preparing to explore the Sau Brasil prospect in Brazil's fringe pre-salt areas. Other majors – including Exxon, Chevron, Shell, Equinor, and China's CNOOC – have recently given up exploration efforts in some of the pre-salt regions offshore Brazil.
In Uruguay, Brazil's neighbor to the south, a subsidiary of Chevron entered in a deal this week to buy 60% and assume operatorship of an offshore exploration block. Chevron Uruguay Exploration Limited will acquire a 60% participating interest in the AREA OFF-1 block from Challenger Energy, and will assume operatorship of the block.
"We firmly believe that AREA OFF-1 holds enormous potential," Challenger's CEO Eytan Uliel said, adding that the company's strategy for the block offshore Uruguay was "to introduce a larger industry player as operating partner, with a view to rapidly progressing the block via an accelerated 3D seismic campaign followed by, we hope, exploration well drilling."
By Tsvetana Paraskova for Oilprice.com