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Recent deepwater oil discoveries off the coast of Namibia are generating huge excitement in the industry, Wood Mackenzie’s Upstream Research Director Ian Thom stated in an opinion piece posted on the company’s website this week.
“The projected scale and quality of these reserves give them the potential to generate huge cash flows and make the country a core region for several major international oil companies (IOCs),” Thom said in the piece.
The Wood Mackenzie representative highlighted in the piece that exploration offshore Namibia dates back to the 1970s but noted that the “breakthrough” happened in February 2022, “with major discoveries by Shell and TotalEnergies in the Graff and Venus blocks”.
“Venus in particular is potentially the biggest ever oil discovery in Sub-Saharan Africa, and among the top 10 globally since the turn of the century,” he added.
Overall, Namibia has 230,000 square kilometers of licensed acreage, Thom said in the piece.
“By way of comparison, Norway has less than 100,000,” he added.
“Currently, the area is hugely under-explored, with fewer than 20 deepwater wells, compared to thousands of wells offshore in places like the North Sea or the Gulf of Mexico,” he continued.
“And with so few wells drilled in Namibia, we can expect further exploration success and resource upgrades. So far, Namibia is in on trend with results achieved from other frontier deepwater hotspots like Guyana, Suriname, and Senegal,” he went on to state.
Thom noted in the piece that the basin is at an early stage of exploration with more wells required to better understand the subsurface conditions.
“There is still much uncertainty around how fields could be developed in terms of design concept, timing, phases, production levels, and how gas is handled or monetized,” he said.
“However, our modelling suggests that at $60 per barrel project economics should be quite robust. In our base case analysis, net present value (NPV) remains positive at prices as low as $40 per barrel,” he added.
Thom stated in the piece that, if the forthcoming appraisal and well flow tests meet expectations, Wood Mackenzie believes oil production in Namibia could surpass 500,000 barrels per day within a decade and continue to grow after that.
“Given the likely size of the opportunity, the scale of upstream investment will be unprecedented for the country, reaching up to $4 billion per year in the first half of the next decade,” he said.
“Monetization of gas will be more complicated. The ultra-deepwater location, seabed topography, offshore conditions, gas quality and limited local market and infrastructure mean reinjection may be preferable initially to benefit from higher oil returns,” he added.
“Operators will adopt a multi-phase development concept to exploit the opportunity. Initially, floating production storage and offloading (FPSO) installations will be used. Later over 100 subsea wells, comprising producers and water and gas injectors, could be drilled on the fields,” he continued.
“Overall, we see Namibia as an emerging core region for the majors, with expected NPV for projects giving them the potential to become crown jewel assets for several big operators,” Thom went on to state.
Thom, who brings 18 years of experience to his role, outlined that the opinion piece comprised a “summary of some of the key points covered” in a Wood Mackenzie report on Namibia deepwater.
Total oil production in Africa was 7.043 million barrels per day in 2022, according to the Energy Institute’s (EI) statistical review of world energy, which was released earlier this year. That figure marked a 3.5 percent year on year drop and 7.5 percent of overall oil production last year, the report outlined. From 2012 to 2022, Africa oil production has dropped 2.7 percent year on year, according to the report.
The top oil producer in Africa in 2022 was Algeria, with 1.474 million barrels per day, followed by Nigeria, with 1.450 million barrels per day, and Angola, with 1.190 million barrels per day, the EI report showed.
The EI’s oil figures include crude oil, shale oil, oil sands, condensates (lease condensate or gas condensates that require further refining) and NGLs (natural gas liquids – ethane, LPG and naphtha separated from the production of natural gas).
They exclude liquid fuels from other sources, such as biofuels and synthetic derivatives of coal and natural gas. They also exclude liquid fuel adjustment factors, such as refinery processing gain, and exclude oil shales/kerogen extracted in solid form.
To contact the author, email andreas.exarheas@rigzone.com
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