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Namibia's exploration drive goes on despite setbacks

Drilling success remains elusive, but Namibia’s offshore is on the map once more for explorers

Namibia has no proven oil reserves, having been largely shunned by regional explorers over the years in favour of better-established hydrocarbons plays, such as its neighbour Angola. But the impact of a higher oil price and lower drilling costs means Namibia's upstream is finally getting some serious attention from drillers.

ExxonMobil recently expanded its presence in offshore Namibia, agreeing in August to acquire a 30% stake in petroleum exploration license 44 (PEL 44), in the Walvis Basin offshore from Azinam, subject to final government and regulatory approvals.

"It provides verification of our belief in the prospectivity in this region and importantly also confirms the significant scale of opportunities, and verifies the attraction of the operating and investment environment," Azinam's managing director David Sturt said on announcing the farm-in.

Azinam acquired 2,000 square km (1,243 square miles) of 3D seismic data over the area in 2016. After interpretation, it acquired an additional 1,160 square km of data now being processed. Azinam—backed by Seacrest Capital—will retain a 12.5% interest. France's Maurel and Prom, the operator, has a 42.5% share. Carried Namibian partners are the state-owned National Petroleum Corp of Namibia (Namcor) with 8%, Livingston Mining (4%) and Frontier Minerals (3%).

Earlier this year, Exxon made its first incursion into Namibia, signing a farm-in deal with Galp Energia to earn a 40% stake in PEL 82 in the Walvis Basin, with Galp retaining operatorship. The licence covers an area of 11,444 square km in water depths of between 300-2,000 metres.

That deal followed on from Total's agreement in October 2017 to take a 70% stake in the Namibian block 2913B, and one in South Africa from UK-based independent Impact Oil and Gas. The blocks lie on either side of the maritime boundary in the Orange Basin. Impact has said the firms plan to drill a well in Block 2913B in 2019. Shell acquired acreage in the Orange Basin in 2014, and in 2017 India's ONGC Videsh acquired minority stakes in acreage from Tullow.

Setbacks highlight risks

The majors may be moving in, but it's the smaller players that lead the way in terms of drilling. Eco Atlantic said in late September that it had received a final environmental clearance certificate from the government to drill an exploration well on the Cooper Block (PEL 30) further north, which it said could hold up to 882m barrels of oil equivalent. The company said it planned to select a drilling location and enter rig contract discussions shortly with a view to drilling in the third quarter 2019 or Q1 2020.

But, while the drillers extoll the potential of offshore Namibia's geology, this still remains an unproved play with all the associated risks.

In October, Chariot Oil and Gas used the Ocean Rig Poseidon drillship to drill its Prospect S well in the PEL 71 licence off central Namibia. Although the well—drilled to a total depth of 4,165 metres—went through the expected turbidite reservoir sands, it encountered water rather than hydrocarbons. The well is now being plugged and abandoned, leaving Chariot and its partners to assess what this means for the prospectivity of surrounding areas. Chariot is operator with a 65% stake, partnering with Azinam (20%), Namcor (10%) and local firm Ignitus (5%).

Source: Petroleum Economist

In the previous month, Tullow Oil said it had abandoned its Cormorant-1 exploration well in PEL 37, after it encountered "non-commercial-hydrocarbons". The well, which had been drilled to a total depth of 3,855 metres, had engendered high hopes in the industry that it could open up a major hydrocarbons system.

Kudu still struggling

Meanwhile, the country's only existing commercially sized hydrocarbons discovery, the Kudu gasfield, remains undeveloped nearly 45 years after it was discovered by Chevron. Several firms have tried to develop the field, but the lack of a big enough local market for the gas has thus far stymied the project.

The latest player to develop Kudu, Norway's BW Offshore, has proven reserves of around 1.3 trillion cubic feet of gas, which acquired operatorship in 2017. A plan was drawn up to send gas via pipeline to shore to feed a power plant-state utility NamPower said in April it would downsize the planned plant from 850 megawatts to 442MW. However, now it seems Namibia's cash-strapped government has given up on the idea completely. Finance minister Calle Schlettwein said in an interview with the Windhoek Observer in mid-September that the government wasn't prepared to back the project by supporting higher electricity tariffs, because it doesn't consider it financially viable.

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