Shell, Galp and the Mopane moment: can M&A fix a 500,000 boe/d hole?

Shell looks, on the surface, like the most comfortable member of Big Oil. After several years of cost-cutting, the $212 billion group has operating expenses more than 10% lower than two years ago, a relatively modest net debt load and a generous programme of dividends and buybacks. 

But analyst work highlighted by Reuters Breakingviews suggests that beneath those tidy numbers sits a long-dated volume problem. On current project plans, Shell’s oil and gas output could slip to around 2.4 million barrels of oil equivalent a day (boe/d) by 2035 – roughly 500,000 boe/d short of its stated ambition to keep production broadly flat.  That “output hole” is increasingly shaping how investors and rivals think about Shell’s next strategic moves.

A strong balance sheet with a thin pipeline

 

Shell is hardly alone in facing the consequences of years of under-investment in exploration. The company has pivoted to “value over volume”, prioritising high-margin barrels and shareholder distributions over sheer growth. That has helped repair the balance sheet and restore investor confidence after the shocks of 2020.

Yet the same discipline means there are fewer large projects in the 2030s pipeline. Reuters reports that analysts see a clear gap opening up between Shell’s flat-production rhetoric and the volumes that existing projects can deliver beyond 2030. 

The problem is most visible in Namibia’s Orange Basin, where Shell was an early mover. After a run of discoveries in offshore block PEL39 starting in 2022, hopes were high that the area could anchor a new growth engine. But after drilling nine wells, Shell has concluded that the resources in PEL39 “cannot currently be confirmed for commercial development”, citing low rock permeability and high gas content. In January 2025 it announced a roughly $400 million write-down on the licence. 

That impairment underlined a stark contrast: the basin is clearly rich in hydrocarbons – but not all discoveries are equal.

Mopane: the standout prize

 

If Shell’s own Namibian finds have disappointed, its Portuguese rival Galp Energia has had the opposite experience. In April 2024, Galp said the Mopane structure in offshore licence PEL 83 could contain at least 10 billion barrels of oil in place, after successful tests at the Mopane-1X and Mopane-2X wells, which flowed light oil at up to 14,000 barrels a day from high-quality reservoir sands. 

Subsequent drilling has reinforced that early view. In February 2025, Galp reported a fifth successful well, Mopane-3X, with high-quality light oil and gas condensate and pressure data that helped de-risk the wider resource.  Jefferies analysts have described Mopane as a candidate for a multi-FPSO development, underlining the scale. 

Galp holds 80% of PEL 83, with Namibian state firm Namcor and Sintana-backed Custos Energy splitting the remaining 20%.  For a company with a market value of around $14 billion and significant commitments in Brazil and Mozambique, fully funding a development of this size would be a stretch. Galp has therefore launched a process to sell roughly half its stake and hand operatorship to a larger partner. 

That process has attracted exactly the kind of names you’d expect. According to Reuters and other industry reports, TotalEnergies and Chevron have emerged as the leading contenders to acquire a 40% operating stake, with Galp aiming to select a preferred bidder by the end of 2025. 

Why Galp suddenly matters so much to Shell

 

Namibia as a whole has gone from exploration backwater to top-tier frontier in three years. Reuters estimates that recent discoveries by Shell, TotalEnergies and others already add up to billions of barrels, and that Namibia could become a top-15 oil producer by around 2035 despite having no current production. 

For Shell, which has just proven how quickly geology can disappoint on its own acreage, Mopane’s scale and apparent quality stand out. A single project capable of delivering several hundred thousand boe/d at plateau in the 2030s is exactly the kind of asset that could make a visible dent in its projected output shortfall.

That is the context in which Reuters Breakingviews has floated a more radical idea: instead of merely joining the queue to buy a 40% minority interest in Mopane, Shell could “gulp down” Galp itself – or at least its upstream business. 

The column sketches an illustrative deal. Pay a 30% premium to Galp’s equity value and assume about €1.2 billion of net debt; that implies an enterprise value of roughly €17 billion. On Breakingviews’ numbers, Galp could generate about €2.4 billion of operating profit by 2028. Add perhaps €700 million of annual cost synergies from stripping out duplicated overheads, tax-effect the result, and the implied post-tax return on invested capital comes out at around 11% – slightly above Galp’s roughly 10% cost of capital. 

In other words: on paper, the deal passes a basic financial test and would bring Shell both Mopane and roughly 110,000 boe/d of existing production, with about 40% growth in the pipeline. 

The politics and optics problem

 

The numbers are only the starting point, though. Galp is not just another portfolio asset; it is tightly woven into Portugal’s energy system and politics. The state holding company Parpública and the Amorim family are key shareholders, and Galp owns and operates critical refining and fuel-supply infrastructure. Any full takeover by a foreign major would be politically sensitive. 

Those sensitivities explain why Breakingviews also floats a narrower option: Shell could, in theory, buy only Galp’s production assets, or even just its Namibian and Brazilian upstream interests, leaving the Portuguese downstream business and corporate shell intact.  Even that, however, would require political finesse in Lisbon and comfort among Galp’s core shareholders.

Then there is Shell’s own narrative to consider. Over the past year, the company has already loosened some interim climate targets, including dropping a 2035 absolute emissions goal, prompting criticism that it is doubling down on fossil fuels.  A large acquisition anchored on a massive new oil province in Africa would underline that impression, even if Shell argued that producing relatively low-cost barrels in Namibia is compatible with its long-term transition story.

Shell’s equity investors may also be ambivalent. A sizeable portion of the shareholder base owns the stock precisely for its combination of capital discipline, buybacks and cautious growth after a decade of value-destroying megaprojects. A €17 billion swing at a frontier basin, on top of a recent $400 million write-down in the same geological neighbourhood, would test that comfort. 

A fork in the road – for Shell and for Namibia

 

None of this means Shell will bid for Galp, or even for a minority stake in Mopane. Management has been consistently careful about large M&A, and there are other ways to manage a 2030s volume gap: incremental expansions in existing hubs, smaller bolt-on deals, or simply accepting a gradual decline in volumes while dialling up cash returns.

But the logic behind the Breakingviews thought experiment is hard to ignore. For a company whose own Namibian exploration has just hit technical limits, Mopane is one of the few single assets large and de-risked enough to change the long-term production story. For Galp, meanwhile, choosing the right partner will determine whether it can transform itself into a mid-tier global producer without over-stretching its balance sheet.

The next year will therefore matter for more than just Galp’s share price. If TotalEnergies or Chevron secure Mopane on attractive terms, Shell risks watching others lock up the easiest barrels in a basin where it has already sunk time and capital. If Shell does move more aggressively, it will have to persuade both Portuguese politicians and its own investors that plugging a 2035 output hole is worth re-opening debates about climate, risk and the proper scale of Big Oil in the transition era.

Either way, Namibia’s offshore geology is now forcing the question that Shell has been able to postpone: how big does it really want to be in the 2030s?

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