By: Tako Koning
The social media have recently featured articles titled “Has the Glow Gone Yonder from Namibia’s Orange Basin” and “Is Deepwater Namibia a Balloon on the Brink of Bursting”?
Such headlines and the contents of the articles, have led to oil industry analysts, including myself, asking: “Whatever is going on in deepwater Namibia?”.
A few weeks ago, UK Major Shell expressed anxieties about the deliverability of the reservoirs on their acreage. Others have commented on the lack of information on the testing of the deepwater oil discoveries. There are widespread misgivings about what to do with the gas. The oil in the Orange Basin is very gas-rich so everyone is discussing the need for a basin-wide gas solution. All indications are that the gas solution in this basin with water as deep as 3,000 metres will be complicated and expensive.
In fifty years of intermittent oil exploration in offshore Namibia, the only discovery was in 1974 with the non-commercial Kudu gas field. Kudu has contingent reserves of only 1.3Trillion cubic feet of gas. Nothing to get excited about. Namibia has never produced a barrel of oil or a cubic foot of gas.
However, in early 2022 Shell electrified the world’s oil industry with their announcement of the discovery of light oil and associated natural gas in the Graff-1X exploration well in the Petroleum Exploration Licence (PEL) 39 in deepwater Orange Basin. Shell is operator of the tract with a 45% working interest and partners include Qatar Energy with 45% and Namcor, the national oil company of Namibia with 10%. The reservoirs are Upper Cretaceous marine sandstones.
Almost immediately thereafter TOTALEnergies announced that the deepwater Venus-1X exploration well located in the adjoining acreage, PEL 56, had discovered oil and associated gas. TOTALEnergies is operator of Venus with a 45.25% working interest and the partners include Qatar Energy 32.25%, Impact Oil & Gas 9.5% and Namcor with 10%. High-quality Lower Cretaceous sandstones are the reservoirs in Venus.
“PUSHING THE TECHNOLOGY ENVELOPE–Production of oil from fields such as Venus and Mangetti will be challenging since they are located in 3,000metres of water and will be “pushing the envelope” of deepwater oil production technology”
In mid-2023 Galp Energia added to the excitement with their announcement of the Mopane oil discovery IN PEL 83, located north of Shell’s PEL 39. Galp Energia is operator with a 80% working interest. The other partners include Custos Energy, a privately held Namibian company with 10% and Namcor also holds 10%.
Within a span of only two years, the Orange Basin has become one of the world’s top-rated areas for oil exploration, with some viewing the basin as even outranking the offshore Suriname-Guyana Basin off the east coast of South America. The Orange Basin had nothing but blue sky with no clouds on the horizon. However, recent news indicates that the basin has challenges which may reduce the blue-sky enthusiasm of the global exploration community and bring expectations down to earth.
From: Sintana Energy website, August 2024
Oil Discoveries, Appraisal Wells and Dry Holes
Shell Graff-1X (Exploration)
Shell La Rona-1X (Exploration)
Shell Lesidi-1X (Exploration)
Shell Jonger-1X (Exploration)
Shell Enigma-1X (Exploration)
Shell Jonger-1A (Appraisal)
Shell Jonger-2A (Appraisal)
TOTALEnergies Venus-1X (Exploration)
TOTALEnergies Mangetti-1X (Exploration)
TOTALEnergies Venus-1A (Appraisal)
TOTAlEnergies Venus-2A (Appraisal)
Galp Energia Mopane-1X (Exploration)
Galp Energia Mopane-2X (Exploration)
Dry Holes
Shell Cullinan-1X
TOTALEnergies Nara-1X
The statistics indicate that of eleven exploration wells drilled by Shell, TOTALEnergies and Galp Energia, nine were declared as oil discoveries and only two dry holes, indicating a success rate of over 80%. On a worldwide scale, such a success rate is unprecedented. However, lingering concerns remain – are these discoveries commercially viable? Why is there so little test information? How about the gas?
“SECONDARY CEMENTATION? According to some informal reports, the reservoirs in Shell’s discoveries may be affected by illite or chlorite cementation which are secondary minerals that can inhibit reservoir permeability. Such secondary cementation … could be a billion-dollar issue if it is pervasive throughout Shell’s acreage.”
An Issue of Scale
Of prime importance is the need to recognize the scale of the Orange Basin. As stated by an industry analyst, “Everything in Namibia is just massive”. This basin comprises 160,000 square kilometres off the coast of southwestern Africa. Namibia’s share of the Orange Basin is 80,000 square kilometres and an equal amount extends into South Africa. The exploration blocks are massive. For example, Shell’s PEL 39 consists of 12,000 square kilometres. TOTALEnergies’ PEL 56 covers over 8,000 square kilometres. The discovered oil fields in terms of aerial extent are enormous. For example, the Jonker-2A well was a successful appraisal drilled an amazing 23 kilometres from the Jonker-1X discovery well. The appraisal well to the Venus-1X discovery was Venus-2A which was an impressive step-out of 13 kilometres northwards. The Venus structure covers an amazing 600 square kilometres, according to preliminary assessments.
Deepwater Namibia – What’s Going On?
As soon as Shell and TOTALEnergies had announced their discoveries, a flurry of announcements and articles were published by various analytical firms and consultants with estimates of oil and gas resources and possible ultimate resources. Some of them announced that at least Ten Billion barrels of oil had been discovered.
For anyone closely following the progress of exploration in deepwater Namibia a major frustration has been the lack of specific information on the testing of the exploration wells. Anywhere else in the world, operators provide investors and the public with announcements of flow rates. Both Shell and TOTALEnergies are distinguished by their lack of information on the quantities of oil and gas discovered to date. Some analysts believed that both companies wished to dampen the enthusiasm for the Orange Basin to reduce the interest from potential competitors.
“Both Shell and TOTALEnergies are distinguished by their lack of information on the quantities of oil and gas discovered to date.”
Estimates of Resources and Reserves
In mid-2023, Namcor enthusiastically provided estimates of the basin’s oil and gas resources. Namcor announced that Jonker contains 2.5Billion barrels of oil in-place. They also estimated that Venus contains in-place volumes of 5.1Billion barrels of oil. Namcor also stated that 11Billion barrels of oil in-place had been discovered so far in the Orange Basin. Furthermore, Namcor estimated that between Shell and TOTALEnergies almost 9Trillion cubic feet of gas had been discovered. However, as detailed below, a half year later, those estimates were significantly dampened.
Maggie Shino, Petroleum Commissioner, Namibia Ministry of Mines & Energy. Photo from Africa Oil Week, November 28, 2018
What’s Going on with Shell?
In mid-2003, Shell re-entered the Graff-1X exploration well for appraisal and testing. No specific information has been released by Shell. Unofficial sources in trade journals mentioned that “flow rates far exceeded expectations”. Other rumors were that when the drillers opened the downhole choke, “oil came like a train” which meant that care had to be taken to control the flow. Another publication mentioned that Graff-1X had achieved “super-charged” flow rates. However, Shell held back on the typically enthusiastic announcements that most oil companies provide on their oil or gas discoveries. Oil industry analysts were wondering if something might have gone wrong with Shell’s discoveries.
In June 2023 Shell’s top upstream executive, Zoe Yujnovich confirmed that a successful flow rate was conducted on Graff. However, Shell stated that they aim “to move at pace” and cautioned that first-oil from Graff would likely not flow before 2030. Namibia’s top energy officials were dismayed at Shell’s cautious strategy.
However, in line with some of these concerns, in January 2024, Maggy Shino, Namibia’s Petroleum Commissioner, Ministry of Mines and Energy announced that Shell has thus far found only 200Million barrels recoverable resources in Graff and 300Million barrels recoverable resources in Jonker.
Recently, Shell’s CEO Wael Sawan spoke to analysts in Shell’s meeting which reviewed second-quarter results. Sawan said of PEL 39: “It’s a complex subsurface. While there is no shortage of hydrocarbon volume, the question is going to be the commercial producibility and the mobility of these molecules. That’s why we are taking our time. We’re thinking through it and making sure we have a good enough picture before we commit our shareholders’ capital to this development”. He also said that “Time is our friend, as we are learning from both our own analysis as well as the analysis and activities of others”. To oil industry analysts this implies that Shell has found their discoveries to be complicated and more analytical work is needed, including more appraisal drilling before the oil and gas can be extracted on a commercial basis. Indeed, according to some informal reports, the reservoirs in Shell’s discoveries may be affected by illite or chlorite cementation which are secondary minerals that can inhibit reservoir permeability. Such secondary cementation is not an academic issue but could be a billion-dollar issue if it is pervasive throughout Shell’s acreage.
Wael Sawan, CEO Shell, Economic Times – India, February 21, 2024
TOTALEnergies – Full Speed Ahead
The testing of Venus-1A was rumored to be a major success. During four days of flow testing, oil and gas flowed to the surface on multiple occasions according to reports in trade journals. TOTALEnergies did not mention any specific oil flow rates nor provided key information such as gas-to-oil ratios. Early this year, the French major drilled the Mangetti-1X oil discovery in 3,000 metres of water on a Venus “look alike” structure and found oil resources rumored to be perhaps one-third the size of Venus. In contrast to Shell’s concerns about the reservoir complexities of their discoveries, the geology more westwards seems less complex and TOTALEnergies recently announced plans to bring Venus onstream at the end of this decade at 180,000 barrels of oil per day through an FPSO. TOTALEnergies CEO Patrick Pouyanne envisions that one day as many as seven floating FPSOs could be operating on his company’s acreage in the Orange Basin. In the meanwhile, TOTALEnergies has stated that by end of 2025 they will be able to announce where they stand with the development of their discoveries.
Galp Energia’s Mopane Discoveries – the Icing on the Cake
Lisbon-based Galp Energia drilled two exploration wells in the Orange Basin in PEL 83 where it has an 80% working interest. According to Namcor, which has a 10% carried interest, the Mopane-1X exploration “confirmed the discovery of a substantial column of light oil in high-quality, reservoir-bearing sands in the Cenomanian-Turonian interval”. Shiwana Ndeunyema, interim managing director of Namcor said: “This is an amazing time for Namibia and Namcor. The Mopane-1 discovery is not just a significant achievement for our organization but is also a beacon of hope for the entire nation’s economic future. We are immensely pleased with these results and excited about potential opportunities this opens up for our country”.
Galp Energia followed up by drilling an appraisal well, Mopane-2X located 8 km from Monpane-1X. In April, Galp announced that well tests in the Mopane-1X reached 14,000 barrels of oil per day equivalent which was the maximum allowable limit. The oil was light oil with low viscosity, minimal CO2, and no H2S. Galp estimated that the Mopane discovery holds over 10Billion barrels of oil in-place. By using a recovery factor of 25%, my “first pass” estimates of the recoverable resources for Mopane are 2.5Billion barrels of oil.
Galp Energia’s stock jumped up 45% when the Mopane discovery was announced. The discovery has added almost $7Billion to the company’s stock market capitalization. Shortly thereafter, Galp announced that it would accept offers from the supermajors and other international players for half of its 80% interest in Mopane.
Oil and Gas Resources and Reserves
It is still early days for Namibia. None of the discoveries in the Orange Basin have yet been declared commercially viable. None yet can be classified as reserves since reserves are volumes of oil which without doubt have been determined to be economically produceable.
The oil consultancy of Wood MacKenzie Ltd estimated Namibia’s recoverable resources at 7Billion barrels of oil equivalent. This estimate was made prior to the Mopane discoveries. Using Wood MacKenzie’s analysis and adding the Mopane discovery, one can estimate that Namibia’s recoverable resources is now approximately 10Billion barrels oil equivalent. This is comparable to the recoverable resource found in Guyana which has been estimated at approximately 11Billion barrels oil equivalent.
However, with these numbers there is an upside and downside. The upside is related to near-future exploration drilling by companies including Chevron, Woodside Energy and Azule Energy. Noteworthy is that Azule Energy has become an important player in the Orange Basin. Azule is a joint venture created in 2022 by combining BP’s and ENI’s assets in Angola. Earlier in 2024, Azule announced a farm-in agreement in PEL 85 and acquiring a 42.5% interest from Rhino Resources. Azule will be operator and drill two exploration wells with the first expected by the end of 2024. The first exploration well will be drilled on a prospect called Sagittarius which Namibia’s Petroleum Commissioner Maggy Shino enthusiastically described as “one of the most amazing prospects” she had ever seen. Drilling by Azule, Chevron and others could double the oil and gas resources of the Orange Basin.
Nevertheless, there remains the serious concerns expressed by Shell. Could the reservoir problem be more prevalent in the Orange Basin than has been recognized so far? Could the issue of secondary cementation also be an overlooked problem in the discoveries of TOTALEnergies and Galp Energia?
There are also huge operational challenges in the more distal parts of the Orange Basin. Venus-1X was drilled in almost 3,000 m of water down to a total depth of 6,300 m. Venus is located almost 300 km away from the coastline. Wells like Venus-1X are expensive. What level of oil prices are necessary to justify such expenses? Production of oil from fields such as Venus and Mangetti will be challenging since they are located in 3,000 m of water and will be “pushing the envelope” of deepwater oil production technology. The current world record water depth in which oil production is happening is in the Gulf of Mexico in the Perdido FPSO operated by Shell. This is in 2,450 m of water. Accordingly, development of fields like Venus and Mangetti will be conducted in unprecedented depths of water.
What to do with the Gas?
A major frustration for analysts including myself is understanding the volume of natural gas in the Orange Basin since there has been a near absence of specific information. Presently there is no commercial outlet for any of the discovered gas. Flaring is not an option. The only option is to reinject the gas for later use as an Orange Basin liquified natural gas project as strongly advocated by the government of Namibia.
During a recent second-quarter results meeting, TOTALEnergies CEO Patrick Pouyanne said that Venus has “a lot of oil” but his company is working on a solution to develop the oil while managing the gas in an economic way. He emphasized that that Venus is more challenging to develop than their Suriname project because the gas volumes are larger. Most analysts would take the view that reinjecting gas in 3,000 m of water will be super-challenging, unprecedented and require leading-edge never-tested technology. How will the costs of super-expensive gas injection wells affect the commerciality of Venus?
Some analysts believe that Galp Energia’s Mopane field could hold significant volumes of gas which could complicate oil production. Galp Energia recently held a second quarter results meeting where Galp’s CEO Filipe Silva declined to talk about the gas-to-oil ratio but said, “We’re not expecting associated gas to be an issue for development of our project”. He stated his view that gas reinjection would likely be prioritized at least in the initial few years. In comparison to the gas challenges of Venus, reinjection of gas in Mopane will be much easier since water depths are only about 400 m.
How about the Kudu Gas Field?
The Namibian government is strongly encouraging Shell, TOTALEnergies and Galp Energia to work closely with Norway-based BW Energy, operator of the Kudu gas field on a joint development plan for the large volumes of gas that have now been discovered in the Orange Basin. Kudu is 130 km off the southwest coast of Namibia in 170 m of water in the northern area of the Orange Basin. The field is located approximately 60 km eastwards from Galp’s Mopane oil discoveries. Kudu has contingent resources of 1.3Trillion cubic feet occurring in a Triassic-age, aeolian (desert-deposited) sandstone reservoir. Eight wells drilled in Kudu indicate that this field is more complicated than the Cretaceous oil and gas reservoirs discovered to date in the Orange Basin. BW Energy CEO Carl Arnet said that they could begin drilling in Kudu in early 2025. BW Energy intends to use a repurposed semi-submersible drilling rig as a floating production unit to reduce costs and accelerate field development of this gas-to-electricity project. The gas from Kudu will be delivered by pipeline to Oranjemund into a to-be-constructed 475 megawatts power plant.
The Regional Super-Importance of Namibia’s Orange Basin
The global oil industry as well as government officials and energy regulators in South Africa and across the South Atlantic will be watching “like a hawk” the ongoing activity in Namibia. Regional well information combined with seismic data shows that the Orange Basin continues southwards into South Africa. Shell, TOTALEnergies and Eco Atlantic have recently been awarded large blocks by the South African government.
In March of this year, TOTALEnergies as operator and Qatar Energy announced signing an agreement to explore in South Africa’s Deepwater Orange Basin Block (DWOB) which lies immediately south of the Venus and Mangetti oil discoveries. South Africa’s ruling African National Congress (ANC) and the South Africa’s Department of Mineral Resources & Energy has already granted an environmental authorization for TOTALEnergies to drill an exploration well – the first of up to 10 wells – in DWOB. Despite opposition from environmental organizations, the government of South Africa is supportive of oil and gas exploration in South Africa’s Orange Basin. The country suffers from a huge deficit in energy and its people suffer from energy poverty. The government is hopeful that the possible oil and gas discoveries could help alleviate the dearth in energy.
The Orange Basin in Namibia and South Africa, Figure 3: The Orange Basin in Namibia and South Africa. From: Peter Elliott, NVentures, UK, 2023
Activity in the Orange Basin will also be closely watched by government officials, energy regulators and oil companies in Brazil and Uruguay due to the contiguous relationship between the Orange Basin and the Pelotas Basin in southern Brazil and Uruguay. “The time for a conjugate leap from the significant discoveries in the Orange Basin to the unexplored Pelotas Basin is upon us”, writes Neil Hodgson, Lauren Found and Karyna Rodriguez, geoscientists with Searcher Seismic, an Australian geophysical company in an article published by Norway-based GeoExpro. In Houston, Texas at the Image2024 conference (August 26 – 29) of the Society of Exploration Geophysicists and the American Association of Petroleum Geologists the Pelotas Basin was described by Searcher Seismic as the least explored Tertiary-Cretaceous delta on Earth.
Furthermore, anyone with any kind of interest in the Orange Basin will be super-keenly watching the farmout of Galp Energia’s interest in Mopane. When this farmout is concluded, Galp must provide a press release since this transaction will be of material impact for its shareholders. This transaction will be a fundamental indication of the value which the oil industry places on the Orange Basin despite the lingering concerns about reservoir deliverabilities and the significant gas issues.
Conjugate relationships between the Orange Basin and the unexplored Pelotas Basin, southern Brazil and Paraguay. From: Searcher Seismic, 2024.
The Future
Namibia could be become Africa’s biggest oil producer, eclipsing Nigeria and Angola who are currently the continent’s largest oil producers. The government of Namibia has requested the oil companies to fast track the development of their oil and gas discoveries to bring them on stream as soon as possible and maximize the revenues for its people. Some oil industry analysts believe that Namibia’s government is also concerned that significant delays in the developments may result in the projects coming on production at a time when the demand for hydrocarbons is significantly on the wane, due to the rapid pace of the energy transition, leaving the discoveries as stranded, never-to-be-produced resources. On the other hand, other energy analysts including myself believe that the energy transition will be a slow process and that the demand for oil and gas will remain robust for several decades. Indeed, after the three years of demand destruction during the covid pandemic, global oil consumption is back to over 100Million barrels of oil per day. Taking the latter view would indicate that the production of oil and gas from the Orange Basin will be long lasting and will be transformational for Namibia’s economy and greatly benefit the people of Namibia.
“Some have come to view the Orange basin as even outranking the offshore Suriname-Guyana Basin off the east coast of South America. The Southern African Basin, it would seem, had nothing but blue sky with no clouds on the horizon…“
BIOGRAPHY Tako Koning is Holland-born, Alberta-raised and resides in Calgary. He was involved with the evaluation of Namibia’s Kudu gas field from 1995 – 1997 when he was portfolio manager with Texaco in Luanda, Angola. At that time, 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 and he closely follows the latest news coming out of the country. He has travelled several times for business and also as a tourist in Namibia. The country is magnificent with its deserts, spectacular coastline, wildlife, and numerous national parks.
Koning has a B.Sc. in Geology from the University of Alberta and a B.A. in Economics from the University of Calgary. He worked worldwide for Texaco for thirty years and subsequently he continued to work in Angola for Tullow Oil and the consultancy of Gaffney, Cline & Associates. During his fifty-year career, he lived and worked for seven years in Indonesia, three years in Nigeria, and twenty years in Angola and the remainder in Calgary. He is pleased to share his knowledge of Namibia in this article. He has been an active member of Africa Oil + Gas Report’s International Advisory Board since the publication was founded by Toyin Akinosho in Lagos in 2001.
