Don’t bank on oil yet

Otis Daniels_Finck
Windhoek ∙ Jo-Maré Duddy

No commercial discovery of oil has yet been made in the Graff-1 exploration well offshore Namibia in the Petroleum Exploration License 39 (PEL 39) in which Shell, QatarEnergy and Namcor have stakes.

“As of now, no commercial discovery is made as yet. However, the drilling results so far are that there’s a presence of an active petroleum system,” mines and energy minister Tom Alweendo reacted on a Reuters report Tuesday evening.

According to Reuters, three industry sources told the news agency that the Graff-1 well results have so far shown at least two reservoirs containing what one of the sources described as a significant amount of oil and gas.

According to a second Reuters source, the drilling results have shown one layer at least 60 metres deep of hydrocarbons, holding an estimated 250 to 300 million barrels of oil and gas equivalent.

“More work still needs to be done to establish whether there’s enough quantity that can be exploited commercially,” Alweendo told Namibia Media Holdings (NHM).

According to the Reuters report: “It is unclear if the discoveries are big enough for Shell to go ahead with the development of the country's first deep water field, the sources said.”


Shell holds a 45% stake in PEL 39 with a 45% interest held by QatarEnergy and a 10% held by the National Petroleum Corporation of Namibia (Namcor). The deepwater exploration well was spud by the Valaris DS-10 drillship in December.

At the time, IHS Markit said “if successful, Graff-1 could spark significant international investment to a region which has had minimal E&P [exploration and production] activity over the last 25 years”.

However, IHS Markit added: “Success at a geological level does not imply economic or commercial success. Analysis of the Graff prospect suggests a minimum economic field size of around 85 MMbbls at US$70/bbl and a potential NPV [net present value] of around US$1.5 billion with a discovery size equal to 320 MMbbls.

“Cost curve analysis indicates an average BEP [break-even price] for new projects offshore West Africa of US$50/bbl. With this as a minimum long-term price expectation, Shell is likely targeting at least 210 MMbbls recoverable. It is also worth noting that there is additional upside potential with several key prospects already identified nearby.”

Regarding the latter statement, IHS Markit was referring to the Venus-1 well, which was drilled in the neighbouring PEL 56 licence shortly before Graff-1. TotalEnergies, the operator of the block, holds a stake of 40% in the PEL, while Impact Oil and Gas has 20%, QatarEnergy 30% and Namcor 10%.


Wood Mackenzie in its Global Upstream Outlook 2022, released in December said the oil and gas sector will continue to rebound this year.

“Deepwater plays with highly productive reservoirs will be prioritised, including giant prospects in Brazil, Guyana, Suriname, Namibia and South Africa,” the global research and consultancy giant said.

According to Reuters: “The Namibian government is planning to make an announcement next week on the details of the discovery.”

Alweendo told NMH that the “Graff-1 drilling campaign is planned to end sometime next week and thereafter we’ll have more information”.