Shell writes down Namibia oil discovery in blow to country

Shell writes down $400 million on Namibia oil discovery

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Technical challenges hinder Shell's Namibia oil development

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Namibia remains optimistic about future oil exploration

LONDON, Jan 8 (Reuters) - Shell will write down around $400 million over an oil discovery offshore Namibia that it deemed commercially unviable in a blow to the southern African country's efforts to become a crude producer.

Shell told Reuters that discovered oil and gas resources in offshore block PEL39 in Namibia "cannot currently be confirmed for commercial development."

Shell and its partners, QatarEnergy and Namibia's national oil company, first discovered hydrocarbon in block PEL39 in 2022, which together with another discovery TotalEnergies made in a nearby block sparked huge global interest in Namibia which has no oil and gas production.

Shell has drilled nine wells in the licence over the past three years, making several other discoveries.

More recently, Portuguese oil company Galp also made a major discovery in a different offshore licence.

But the British company encountered technical and geological difficulties for the development of the resources.

"While we recognise that extracting the discovered resources presents challenges, the extensive data collected shows that there remain opportunities. Together with our partners, we are continuing to explore potential commercial pathways to development, while actively looking for further exploration opportunities in Namibia," Shell said in a statement on Thursday.

CEO Wael Sawan told analysts on Oct. 31 that Namibia's acreage was "very challenging," and that the lower permeability of the rock made extracting oil and gas harder.

Sources told Reuters that the offshore discoveries also had a high natural gas content, further complicating their development.

Namibia's Ministry of Mines and Energy said in a statement on Thursday that Shell's decision will not significantly impact Namibia's oil and gas development.

"It is not a setback. We are positive that the remaining potential of PEL39 and other exploration campaigns will translate into commercial developments," the ministry said.

Galp, Chevron, Rhino Resources and Azule Energy, a joint venture between Italy's Eni and BP, are all planning to drill exploration wells in Namibia this year. TotalEnergies plans to make a final investment decision on the development of its Venus discovery by year-end.

Shell said in a trading update ahead of fourth quarter results on Jan. 30 that it expects to take an exploration write-off of around $400 million, without providing details.

It will take another $300 million write-off related mainly to exploration licences in Colombia, the company added. (Reporting by Ron Bousso; Editing by Nick Zieminski and Sandra Maler)