Best of 2024: FT – Oil boom or bust? Namibia’s offshore wells defy the odds

Revisit the remarkable story of Namibia's offshore oil exploration, where a staggering 88% success rate has shattered industry norms. With Shell, TotalEnergies, and Galp uncovering billions of barrels of oil, and Chevron set to drill 10 new wells, this promising region could reshape global oil dynamics. But can the law of averages keep pace with soaring expectations? Explore how these high-stakes ventures could impact future investments, oil prices, and the industry's long-term prospects in this deep dive into one of the world's most intriguing oil plays..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here..The seventh BizNews Conference, BNC#7, is to be held in Hermanus from March 11 to 13, 2025. The 2025 BizNews Conference is designed to provide an excellent opportunity for members of the BizNews community to interact directly with the keynote speakers, old (and new) friends from previous BNC events – and to interact with members of the BizNews team. Register for BNC#7 here..Namibian oil boom – A potential game-changer in the global oil market ignites investor interest.Investors are eyeing Namibia's Orange basin as a potential game-changer in the global oil market. The Namibian oil boom, if sustained, could inject new life into exploration investments, potentially influencing global oil prices in the years ahead..By Alan Livsey.Law of averages could catch up with explorers, as typical success rate for a series of offshore wells is around a third ___STEADY_PAYWALL___.Those arguing that higher oil prices are ahead often point in evidence to a chronic lack of investment in oil exploration of late. Without sufficient capital put into large, offshore projects, crude supply will wither, they say. In fact, there have been very large oil discoveries including in the Norwegian North Sea, offshore Guyana (11bn barrels of oil) and, most recently, offshore Namibia..Shell, TotalEnergies and Portugal's Galp have made a series of discoveries of oil (and some gas) off the coast of the south-west African country in the past two years. Together these could produce hundreds of millions, if not billions, of barrels of oil..If anything, a surprisingly high success rate could spur more activity. Of 17 pure exploration wells since February 2022, there have been 15 confirmed discoveries of commercial quantities of oil or gas..Certainly Chevron has confidence in this outcome. In October 2022 America's second-largest oil company announced that it had acquired 80 per cent of an offshore licence from the Namibian affiliate of Toronto-listed explorer Sintana. Junior explorer Sintana was an early buyer of licences to drill off the Namibian coast..Chevron's acquired acreage is just west of Galp's. The American oil company has announced it will drill 10 wells starting in the fourth quarter of this year. Investors in Sintana, with a C$122mn market value, have done well. Its share price has more than tripled over the past year..Of course, the law of averages could soon catch up with these explorers. The typical success rate for a series of offshore wells such as these is around a third. Such a high hit rate (88 per cent so far) might mean that this Orange basin in Namibia could be highly prolific. But history suggests this kind of success rate will tail off in the next couple of years..These wells cannot be cheap. Some are being drilled in 5,000 metres of water, before going even deeper through the seafloor. Galp had budgeted $200mn-$300mn for its first two successful wells back in October. Even if those costs come down over time, a few "dry" wells could cause some of these oil companies to rethink their plans..It is too early to tell whether the Namibian offshore oil play will turn into another large source of oil. But early indications suggest large finds in the hundreds of millions of barrels of recoverable oil, at least. Inevitably, the successes of Total, Shell and Galp will encourage large oil companies to direct more investment into exploration..That impetus, as well as the potential added supply if significant, could help keep a lid on oil prices in the years to come..Read also:.Netumbo Nandi-Ndaitwah poised to become Namibia's first female presidentVoters frustrated as Namibia's SWAPO somehow manages to retain powerNamibia heads into tightest election since independence as nation gears up for oil boom.© 2024 The Financial Times Ltd.

Best of 2024: FT – Oil boom or bust? Namibia’s offshore wells defy the odds

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