The past several weeks has been full of rumours and speculation about the size of the oil and gas discoveries in deepwater Namibia. Indeed, two weeks ago, a research note from UK-based Barclays (Barclay’s Investment Bank) stated that the currently drilling TOTALEnergies Nara-1X, if successful, could double the estimated resources of TOTALEnergies’ Venus discovery from 3 to 6Billion barrels of oil equivalent. This article is written to be a synthesis of the rumours, speculation, and the hard facts in official press releases. This article will focus on the activities by Shell, TOTALEnergies and some recent “newcomers”. The viewpoints of the government of Namibia are also included herein.
Graff Oil Discovery, Orange Basin
In January 2022, rumours began that Shell had made a mega-oil discovery in the Graff-1X
exploration well in the deepwater of Namibia’s Orange Basin. Graff-1X was drilled in Petroleum License (PEL) 39. Shell is operator with a 45% working interest and partners include Qatar Energy with 45% and NAMCOR, the national oil company of Namibia with 10%. Graff-1X was drilled in 1,962 metres (6,435 feet) of water to a depth of 5,376 metres (17,633 feet). The well is located 270 kilometres (162 miles) from the coastline. Shell confirmed the news on February 7, 2022, and oil industry analytical companies such as Wood Mackenzie estimated that the Graff field has recoverable resources of 700Million barrels of light oil. The reservoirs are Upper Cretaceous (Cenomanian) marine sandstones.
LaRona Appraisal Well. Shell subsequently drilled the La Rona appraisal well which was aggressively positioned as a long-distance step-out well 8 kilometres (5 miles) northeast of the discovery. Namibian government officials in a virtual presentation in April 2022 to the Canadian Global Exploration Forum (CGEF) in Calgary indicated that La Rona was “looking very good”. According to the rumor mill, the results of La Rona were so positive it raised expectations that Graff could contain 1 billion barrels of oil recoverable and up to 6Trillion cubic feet of gas. Accordingly, on a 6 mcf gas to 1 barrel-oil-equivalency, Graaf may have recoverable resources of 2Billion barrels of oil and gas.
Jongker-1X Exploration Well. In December 2022, Shell spudded the Jonker-1 exploration well about 18 kilometres (11 miles) west of Graff. This was part of a three-well programme which included a production test on the Graaf-1X discovery well and a second exploration well, Lesedi-1X. The Jonker-1X well was reported to be exploring for a different geological play from the Upper Cretaceous light oil discoveries made in Shell’s Graaf-1X and La Rona-1 wells. Instead, Jongker-1X was targeting an eastern extension of the Lower Cretaceous oil and gas play that TOTALEnergies found in its Venus-1X exploration well. Jongker-1X is rumoured to have intersected hydrocarbons is a shallow reservoir, offering significant encouragement in addition to positive results found in the deeper primary objective. In early March 2023, Namcor said that Jongker-1X was “a major light oil discovery that will be appraised”. In May 2023, Shell spudded the Lesedi-1X exploration well approximately 20 km northeast of Graff. Also in May, Shell filed plans to drill as many as 10 new exploration and appraisal wells on PEL 39.
Shell was production testing Graaf-1X during May. Southern Africa’s exploration community was full of rumours that the well had achieved “super-charged” flow rates. Descriptions included “like a train”. In June, Shell’s top upstream executive, Zoe Yujnovich confirmed that a successful flow rate was conducted on Graaf. However, no specific flow data was made public. After completion of the well tests, to the dismay of some of Namibia’s top energy officials, Shell stated that they aim “to move at pace” and cautioned that first oil from Graaf would likely not flow before 2030. Some industry analysts believe that Shell is deliberately downplaying the test results to stop excessive speculation about the potential of the deepwater Orange Basin.
For oil industry observers and analysts including myself, the magnitude of the play-opening Graaf discovery and follow-up drilling is amazing. Unconfirmed rumours now indicate that Shell is already giving thought to utilizing at least one floating LNG vessel to produce the gas and one or two FPSOs to produce the oil. According to Namibia’s daily business publication The Brief, May 13, 2023, research conducted by Barclays suggests that if Shell were to discover 8Billion barrels of oil in place, it could account for up to 6% of Shell’s stock market capitalization. Shell’s current stock price is $2,990/share. The company’s market capitalization is $200Billion. Based on Barclay’s analysis this equates to Shell’s assets in Namibia valued at $12Billion assuming Shell’s exploration and appraisal in Namibia continues to be successful.
Venus Oil and Gas Discovery, Orange Basin. Two weeks after Shell’s announcement about Graff-1X, TOTALEnergies announced on February 24, 2022, that the Venus-1X deepwater exploration well drilled in Block 2913B had intersected 84 metres (275 feet) of net pay in a high-quality Lower Cretaceous sandstone reservoir containing light oil and associated gas. Informal reports mentioned that in fact the well intersected as much as 250 metres (820 feet) of net pay. The well was drilled in 2,900 metres (9,515 feet) of water to a total depth of 6,296 metres (20,657 feet). The oil and gas-bearing reservoir is rumoured to cover about 600 square kilometres. Also rumoured is that this field will be produced through several FPSOs.
Soon after Venus-1X was completed, Wood MacKenzie was reported in various oil industry publications stating that Venus may have recoverable oil resources of about 3Billion barrels of oil which positions Venus as Sub-Sahara Africa’s largest ever oil discovery. If these estimates are confirmed by drilling, then Venus is larger than Nigeria’s giant Agbami, Akpo and Engina fields and larger than Angola’s giant Girassol and Dalia oil fields. TOTALEnergies is operator of Venus-1X with a 40% working interest and the partners include Qatar Energy 30%, UK-based Impact Oil & Gas 20% and NAMCOR with 10%. Vancouver-based Africa Oil Corp has a stake in Venus through a 31% working interest in Impact Oil & Gas. Keith Hill, chief executive officer of Africa Oil Corp said that the operator, TOTALEnergies, would fast-track Venus’ development through an early production system. Hill in an interview on November 25, 2022, stated “I think it will go very fast when we have at least two wells that are tested and confirm the lateral continuity and deliverability of the reservoirs. I think you’ll see this project moving very quickly into an early production phase”.
Nara-1 Appraisal Well. TOTALEnergies and its partners have commenced their second drilling campaign with an appraisal well of the Venus-1X discovery called Nara-1. This well is 13 km from Venus-1X so it is a bold step-out which is almost unheard of in exploration circles, which just indicates how large this discovery may be. Nara-1 is being drilled by the Tungsten Explorer drillship. A second drillship, the Deepsea Mira has arrived to test Venus-1X with a flow test.
Development Challenges for TOTALEnergies. Water depths in the westerly block ranges from 3,000 metres (9,900 ft) and 3,900 metres (13,000 ft) which is pushing the technical envelope for deepwater drilling and will pose significant challenges for any development. Furthermore, Venus will be logistically challenging since it is located almost 300 km (180 miles) from the coast.
TOTALEnergies announced its intentions to deploy half of its global exploration budget in 2023 for further exploration and appraisal drilling using the two drillships in the Orange Basin. This highlights the huge importance of Namibia for THE French major.
NEWCOMERS TO DEEPWATER NAMIBIA
Chevron. San Ramon, California-based Chevron farmed into PEL 90 which was operated by Australia’s Harmattan Energy. PEL was held by Tullow Oil who unfortunately relinquished the block just before the Graff and Venus announcements. Chevron is accelerating seismic surveying and drilling plans and is committed to spending $100 million on PEL 90.
Galp. Lisbon-based Galp Energia has lined up a harsh environment semi-submersible to drill two wells this year on its block PEL 83. Galp has an 80% working interest in PEL 83. This block is located just north of the Graff and Venus discoveries. An advantage of PEL 83 is that the water depths are much shallower than that of Graff and Venus.
Woodside. In March 2023 Australia’s Woodside Energy entered into an agreement with Australia’s Pancontinental Energy to acquire a 56% interest in PEL 87. Woodside will pay the full cost of a 5,000 square kilometer 3D seismic survey at an estimated cost of $35 million.
Beyond Namibia. The oil and gas play discovered by Graff and Venus also extends southwards into South Africa where one or more exploration wells will be drilled this year. If future drilling in South Africa’s portion of the Orange Basin is successful, this could be of major impact on South Africa’s economy and help alleviate the energy shortages which currently plagues South Africa.
OBJECTIVES OF THE GOVERNMENT OF NAMIBIA
The Namibian government has stated the deepwater Orange Basin is of national importance. Shell and TOTALEnergies have been told to accelerate their exploration and appraisal and bring the oil and gas discoveries into production as soon as possible.
The total population of Namibia is only 2.5Million people. Despite Namibia’s significant mineral resources and tourist industry, Namibia is not a rich country. It had a per capita income in 2021 of only $4,865 per person compared with the USA’s $70,480. In parts of the country the economy is subsistence farming. Namibia suffers from high rates of unemployment. Life expectancy in Namibia is only 63 years compared to 76 years for Americans. The government of Namibia is determined that oil and gas activities will be of significant value for Namibians. The Shell and TOTALEnergies discoveries according to government estimates, could generate annual taxes and royalties between US$3.3 – US$5.3Billion with the potential to create 3,600 direct jobs at the peak of production. Many more indirect jobs would be created by businesses supporting the oil and gas activities. My view is that the revenue and employment opportunities created by oil and gas production, if responsibly managed, will be highly beneficial and transformational for Namibia’s economy and people.
Tako Koning is Holland-born and Canada-raised. He has a B.Sc. in Geology from the University of Alberta and a B.A. in Economics from the University of Calgary. During part of his long career in the oil industry, he lived and worked in Angola from 1995 – 2015. He was involved with the evaluation of Namibia’s Kudu gas field for three years when he was portfolio manager with Texaco in Luanda. Shell was operator of Kudu and Texaco had a 15% working interest in the field. Since that time, he has had an abiding interest in Namibia’s oil industry. He closely follows the latest news coming out of the country. He has travelled in Namibia for business and as a tourist. The country is magnificent with its deserts, spectacular coastline, wildlife, and extensive national parks. Koning is pleased to share his knowledge of Namibia in this article. He has been a member for the past 22 years of the International Advisory Board of Africa Oil + Gas Report (AOGR) since AOGR was founded in 2001 in Lagos, Nigeria by Toyin Akinosho.