Namibia’s Ambition to Become Oil Hotspot Tested by Wildcatter

Searching for oil prospects in a block bigger than Rhode Island, Travis Smithard made a last-minute decision to send the Noble Venturer drillship twice as far as originally planned to spud a well off Namibia’s coast. 

The switch paid off. The 230-meter (750 feet) vessel’s journey through the Atlantic waters led to Rhino Resources Ltd. announcing a significant discovery in April. That put the privately owned company on the map in Namibia with majors like Shell Plc and TotalEnergies SE, whose finds in the past three years have made the southern African nation a new exploration hotspot.

Now the spotlight is on the wildcatter again as it drills another well called Volans, which it bypassed earlier this year to focus on Capricornus about 15 kilometers (9 miles) away. The market is closely watching the fortunes of each new campaign to see if Namibia — a major supplier of commodities like uranium and diamonds, but which doesn’t yet produce any crude — really has the resources to match its oil ambitions. 

Rhino’s diversion to the Capricornus well was to “sort of broaden the aperture here a little bit” to understand a wider swath of the block, Chief Executive Officer Smithard said in an interview in the capital Windhoek. The decision was based on data that allowed for a quick change, he said.

The area is poised to become a major African basin, with producers scrutinizing the best projects to hold as the energy transition moves the world closer to peak oil demand. Namibia aims to start output by 2030, and at one point there was optimism that it could become another Guyana — where a giant oil discovery has transformed the sparsely populated country’s economy.

“We are currently very, very busy at a stage where we are now trying to cross over the path of moving Namibia from being an exploration country,” Petroleum Commissioner Maggy Shino told an oil conference in Windhoek this month. The next goal is development, she said.

Developing oil fields can potentially generate as much as 7.7 billion Namibian dollars ($435 million) a year in state revenue through royalties and taxes, according to the government. For the global oil market, it would bring extra barrels online at a time when there’s uncertainty over long-term supply-and-demand prospects.

It’s still unclear how much oil Namibia has, and no discoveries have yet been declared commercial, though the government has estimated resources as high as 11 billion barrels. If actually realized, that would put reserves on the way toward those in Guyana, though there are concerns that geological challenges mean oil would flow less easily. The South American nation is among the leading sources of oil production growth outside of OPEC+.

Any development in Namibia may still be some way off, as it typically takes at least several years — or even a decade in the case of Senegal’s Sangomar field — before discoveries lead to production.

For Rhino’s Capricornus well, appraisal work needs to determine if it’s feasible to develop. There’s now additional focus on Rhino, whose partners include BP Plc and Eni SpA joint venture Azule Energy, to see if it strikes gold with Volans — which is being drilled using the Deepsea Mira platform. Results are expected next month.

“The pressure is on Rhino and all the partners,” Victoria Sibeya, exploration executive at state oil company Namcor, told the Windhoek oil conference. “We await positive results with great anticipation.”

Wildcatters typically work through a portfolio of prospects, with discoveries often bought out by oil majors for development. But the search for oil has become a challenge due to financing and the risk of multiple misses.

There have already been some disappointments, including from oil giants. Chevron Corp. in January said its first Namibian well was unsuccessful, while Shell, which reported one of the first discoveries in 2022, wrote off about $400 million of wells. That prompted the government to temper expectations for long-term prospects before Rhino’s discovery earlier this year.

Companies have drilled just about two dozen wells so far, compared with thousands in places like the North Sea. Still, Namibia is an “absolute leader” when it comes to exploration potential in relation to western Africa, said Ian Thom, a research director at Wood Mackenzie Ltd.

Production Hurdles

There’s still much work to be done before any production starts. The government needs to update legislation to address the oil and gas sector in order to bring about regulations for exploration and production. President Netumbo Nandi-Ndaitwah, who assumed the role in March, has moved the industry under her office, and officials are considering incentives to help kick-start development of fields.

Waiting for clarification on terms and avoiding any potential misunderstandings with the state is partly why TotalEnergies is being cautious with proceeding to production.

“It’s better to take time at the beginning, even if, of course, we are ready,” TotalEnergies CEO Patrick Pouyanne, who met Nandi-Ndaitwah in April, told investors last month. “I don’t want to have a dispute.”

Developing multiple discoveries would require hefty infrastructure upgrades to ports like Walvis Bay and Luderitz, which could see activity jump 10-fold as they handle equipment used to produce oil offshore. Namibia’s port authority recently delayed plans to upgrade Luderitz — which serves the fishing industry alongside other commodities sectors — until details about the work are clarified.

Shell considers Namibia a priority, despite its writedown, and plans more exploration there next year, according to Eduardo Rodriguez, the company’s country manager. Portugal’s Galp Energia SGPS SA last month said it’s in talks to sell a stake in its Mopane discovery to an experienced operator.

“It’s looking really quite attractive that we’re going to see a few more wells and exploration appraisal activity,” said WoodMac’s Thom. “We’ve seen a few setbacks, but there’s still enough potential.”

Rhino wants to reach first oil, which would mean beating TotalEnergies, despite the French major finding oil well before it. But for now the focus is on exploring the block, according to Smithard.

“It’s a positive outlook,” he said. “If we have a negative result, then I think we obviously have to then just reevaluate.”