Namibia’s oil dream faces a gas bottleneck

Main restaurants

• The high percentage of gas in Namibia’s offshore oil fields has required additional infrastructure to process and manage the gas, which could limit profitability and delay development.
• A plan is being developed to send the gas to a nearby onshore power station, which will supply Namibia and other surrounding countries, but this venture will require major upgrades to an existing project.
• Major oil companies are rethinking their plans due to high gas content, rising costs and a changing energy landscape. Some are considering renegotiating terms or delaying production.

The first hope was around the discovery of oil at sea in Namibia faced a major obstacle: an unexpectedly high percentage of gas in the fields. This unexpected discovery will require additional infrastructure to process and manage the gas, which could limit profitability and delay development.

The Namibian government wants to take advantage of this resource and is encouraging companies to use the gas instead of flaring it. A plan is being developed to send the gas to a nearby onshore power station to supply Namibia and neighboring countries. However, this initiative requires a major upgrade of an existing project that was originally designed for a smaller volume of gas from another field.

Challenges for major oil companies

Major oil companies recognize the need for oil in the near future, but are under pressure as the International Energy Agency predicts that global oil demand will peak by 2030 due to an increase in vehicles electricity and renewable energy sources. This forecast casts doubt on the long-term viability of major investments in Namibian oil projects.

The high level of gas is forcing companies to reconsider their plans. TotalEnergies, which is facing rising costs and is targeting production costs below $20 per barrel, is considering a renegotiation with authorities. While the company still hopes for a final investment decision next year and the first oil production in 2029, it is now focused on realizing commercially viable projects.

Company responds to challenges

Shell, which faces challenges due to the shallowness of the rock, is exploring options such as a floating gas extraction unit to process the gas and possibly slow down oil production. They are actively looking for ways to develop strong commercial projects in Namibia.

Galp, in uncertainty, has halted the sale of half of its stake in Namibia pending the results of another investigation. Other companies, including Chevron and BP-backed Azule Energy, are also planning drilling operations in Namibia this year.

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