Shell announced a US$400 million (A$645.58 million) write-down related to its offshore Namibia oil discovery, citing the project’s commercial inviability.
The decision marks a setback for Namibia’s ambitions to emerge as a crude oil producer, although the government remains optimistic about the country's exploration potential.
Shell revealed to Reuters that Namibia’s offshore block PEL39 “cannot currently be confirmed for commercial development". The block, jointly operated with QatarEnergy and Namibia’s national oil company, was discovered in 2022 alongside another find by TotalEnergies, sparking global interest in Namibia's untapped hydrocarbon resources.
Shell has drilled nine wells in PEL39 over the past three years, yielding several discoveries. However, technical and geological challenges have hindered the project’s development.
Despite the announcement, Namibia’s Ministry of Mines and Energy expressed confidence in the country’s oil prospects, with Tom Alweendo stating: “While the Shell write down is unfortunate, the Ministry of Mines and Energy believes that we have barely begun to scratch the surface of the country’s offshore resources. The Namibia governement will continue working with dedicated companies to develop these resources and our plan to first oil are still on track. We remain confident that ongoing exploration efforts will reveal commercial opportunities and look forward to delivering first oil production in the near future.”
Other oil majors, including Galp, Chevron, and Azule Energy, are intensifying exploration efforts in Namibia. TotalEnergies plans to make a final investment decision on its Venus discovery by year-end, while Woodside Energy is poised to operate PEL87 following seismic data acquisition. Rhino Resources will commence drilling at PEL85 in Q1 2025, targeting two high-impact wells.
Meanwhile, Shell lowered its fourth-quarter liquefied natural gas (LNG) production outlook and expects trading results to be significantly weaker compared to the previous quarter.
The trading update comes ahead of its full-year results, scheduled for 30 January.
The British energy giant also announced plans to take $1.5 billion to $3 billion in non-cash, post-tax impairments. Up to $1.2 billion of these write-offs relate to assets in its renewables division in Europe and North America.
Last month, Shell disclosed it would scale back new offshore wind investments and restructure its power division after a comprehensive review of the business. The move aligns with CEO Wael Sawan's strategy to prioritise high-margin operations.
Shell does not disclose earnings figures for its trading activities but remains one of the sector's most prominent players.
At the time of writing, Shell (LON: SHEL) stock was trading at £2,613.5, up 1.3% from Wednesday's close of £2,579.5. The stock reached a day low of £2,599 and a day high of £2629. Shell's market cap stands at £160.43 billion (A$318.71 billion).
