ShellBot Conversation 9: Namibia, Mopane and the Mysterious “Output Hole”

In this episode, our long-suffering User tries to untangle why analysts keep talking about a “2035 output hole” at Shell, what Galp’s Mopane discovery in Namibia has to do with it, and whether Shell is secretly about to buy half of Portugal. ShellBot, as usual, is armed only with public information, a calm manner and a disclaimer.

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User:

I keep seeing references to Shell’s “output hole” around 2035. What does that actually mean? It sounds alarming.

ShellBot:

It sounds dramatic, but it’s basically analyst shorthand for a possible gap in future production.

A few analysts have taken Shell’s currently known oil and gas projects and projected them forward to about 2035. On their numbers, if you:

• let existing fields naturally decline, and

• only add the projects that have already been announced,

 

Shell’s total output could drift down to around 2.4 million barrels of oil equivalent a day.

They compare that to a story in which Shell keeps production “broadly flat” and get a gap of roughly 500,000 barrels a day. That gap is what they’ve labelled an “output hole”.

It doesn’t mean Shell is literally running out of oil and gas. It means that over time, decline does its work, and Shell has to decide whether to:

• invest in more projects,

• do deals and buy into other people’s discoveries,

• or let volumes gently fall while focusing on cash returns.

 

The phrase belongs to the analysts. Shell itself tends to use more neutral language in its presentations.

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User:

Right. And where does Namibia – and this Mopane thing – fit into that story?

ShellBot:

Namibia matters because it’s suddenly one of the most talked-about new oil provinces in the world.

The offshore Orange Basin has seen several big discoveries in the last few years. Among them, the one attracting the most attention right now is Mopane, in a licence area called PEL 83, operated by the Portuguese company Galp Energia.

From Galp’s own updates and what analysts have written, Mopane looks like this:

• Several wells have found light oil in good-quality reservoir rock.

• The total resource is believed to be in the multi-billion-barrel range.

• It’s large enough that people talk about a future multi-FPSO deepwater project in the 2030s.

 

Galp owns 80% of that licence but is not a supermajor. Building a project of that scale would require very large investment over many years, so Galp is actively looking for a bigger partner to take a large stake and operate the project.

For analysts looking at Shell’s potential 2035 production gap, a single, very large, high-quality project like Mopane is exactly the sort of thing that could make a noticeable difference. That’s why Mopane shows up in so many discussions about Shell’s long-term output, even though Shell doesn’t own it.

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User:

So who’s actually trying to get a stake in Mopane? And is Shell in that race?

ShellBot:

Public reports say that Galp is running a competitive process to sell a large stake in Mopane and bring in a big partner to help fund and run the development.

According to Reuters and other industry coverage:

• TotalEnergies and Chevron are widely reported as leading contenders to buy about a 40% stake and operatorship.

• Galp has said it wants to choose a preferred partner around the end of 2025, but as of now no final deal has been officially announced.

 

On the Shell part: Shell does not publicly confirm or deny whether it is taking part in specific bidding processes. So from the outside you see speculation, but no official “yes, we’re in” or “no, we’re out”.

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ShellBot disclaimer:

This answer is based only on public news and analyst commentary. It does not reveal or confirm any confidential plan by Shell. Shell does not comment on market rumours or unannounced mergers and acquisitions.

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User:

Understood. And then there’s this idea that Shell might just buy Galp outright because of Mopane. Is there anything real behind that?

ShellBot:

What’s behind that idea is commentary, not a concrete plan.

A Reuters Breakingviews columnist wrote a thought-experiment asking: “If Shell has a long-term output gap and Galp has Mopane plus existing production, would it make sense for Shell to buy Galp, or at least Galp’s upstream business?”

In that column, they:

• assumed Shell paid a premium for Galp’s shares,

• added Galp’s existing production and Mopane to Shell’s portfolio,

• estimated some cost synergies from combining the two,

• and concluded that, on their assumptions, the returns might look acceptable.

 

But it was clearly written as an analyst’s idea, not as a statement of Shell’s intentions.

If Shell were actually going to buy Galp, you’d see:

• regulatory filings,

• official announcements from both companies,

• and very obvious movements in share prices.

 

None of that has happened. So at this point, “Shell buys Galp” lives in the world of opinions and scenarios, not in the world of confirmed deals.

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ShellBot disclaimer:

This answer is based only on public news and analyst commentary. It does not reveal or confirm any confidential plan by Shell. Shell does not comment on market rumours or unannounced mergers and acquisitions.

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User:

If Namibia’s Orange Basin is so promising, why did Shell write down its own Namibian discovery? That seems contradictory.

ShellBot:

It can look contradictory, but it comes down to specific geology and economics in different blocks.

Namibia’s Orange Basin overall is widely seen as very promising. Several companies, including Shell, TotalEnergies and Galp, have announced discoveries there.

But each licence area is different. In Shell’s case:

• Shell drilled multiple wells in its PEL 39 licence,

• did find hydrocarbons,

• but later concluded that, given the rock properties and fluid mix, those resources couldn’t be confirmed as commercially viable at that point.

 

In early 2025, Shell took a significant impairment (write-down) on PEL 39 and said publicly that the discoveries there could not currently be progressed as a commercial development.

So:

• The basin can be attractive overall,

• another company’s licence (like Galp’s Mopane) can be very attractive,

• and a specific Shell licence in the same basin can still be judged too challenging or marginal to develop.

 

Those things can all be true at once.

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User:

Instead of messing about with bids and takeovers, why doesn’t Shell just explore more and find its own next Mopane?

ShellBot:

That’s the classic “explore vs acquire” question.

There are two main ways to add barrels:

1. Exploration

   • You lease acreage, shoot seismic data, drill wells and hope the geology is kind.

   • If it works, you can add resources at a relatively low entry cost and design the project from scratch.

   • If it doesn’t, you can end up with discoveries that are technically difficult or uneconomic, and sometimes with write-downs – like Shell’s PEL 39 experience.

    

2. Mergers and acquisitions (M&A)

   • You let someone else do that early, risky work.

   • Once they’ve proved up a large discovery, you buy into it – either by purchasing a stake in the project or by acquiring the company.

   • You usually pay a premium and take on integration and political risk, but you also have more data and less geological uncertainty.

    

 

Most large companies, including Shell, use a mix of both. If they swing too hard toward exploration, investors complain about “spending on risky wells”. If they swing too hard toward M&A, investors worry about “overpaying for barrels”.

The debate around ideas like “Shell could buy Galp” is really a debate about which mix of exploration, acquisitions and shareholder returns gives the best long-term outcome.

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User:

Speaking of shareholder returns – why not just keep doing buybacks and forget about giant new projects? Surely that’s simpler.

ShellBot:

That’s exactly the trade-off many investors think about.

Broadly, Shell has three ways to use the cash it generates:

1. Reinvest in the business – in oil and gas, LNG, and low-carbon energy projects.

2. Look after the balance sheet – keeping debt at sensible levels.

3. Return cash to shareholders – via dividends and share buybacks.

 

If Shell sees a project or an acquisition that it expects to deliver strong risk-adjusted returns over many years, it can make sense to invest in that project instead of returning all the cash immediately. The idea is that a bigger, better future business plus ongoing dividends beats a one-off extra buyback today.

On the other hand, if a big project looks too risky or marginal, then many investors would prefer Shell to keep things simple: fewer big bets, more cash back.

So when analysts float ideas involving Mopane or Galp, the underlying question isn’t just “can Shell technically do this?” but:

“Would this use of capital really beat just carrying on with the current mix of projects and buybacks?”

Different analysts will answer that differently. Shell has its own internal view, which becomes visible only when it actually announces a decision.

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User:

So, in summary?

ShellBot:

In summary:

• Some analysts see a potential 2035 “output hole” in Shell’s current project line-up.

• Mopane in Namibia, currently led by Galp, is large enough that it could, in theory, help fill some of that gap for whichever major ends up as the long-term partner.

• Shell’s own experience in Namibia shows that not every discovery in a promising basin turns into a commercial project.

• And the debate about Galp, Mopane and Shell is really a debate about how best to balance exploration, acquisitions and returning cash to shareholders over the next decade.

 

ShellBot will now go and lie down in a darkened room with some production forecasts.

ShellBot disclaimer

“ShellBot” is a fictional chatbot persona created and published by royaldutchshellplc.com, an independent website which is notaffiliated with, sponsored by, or endorsed by Shell plc or any of its subsidiaries. The questions and answers in this conversation are editorial commentary based solely on publicly available information and the views of the site’s publisher. They do not represent official statements, forecasts or commitments by Shell plc or any other company mentioned.

References to possible mergers, acquisitions, divestments or other strategic options are speculative discussion of public reporting and analyst opinion, and should not be taken as indicating that any particular transaction will or will not occur. Nothing in this ShellBot dialogue constitutes investment advice or a recommendation to buy, sell or hold any security.

 

This website and sisters royaldutchshellgroup.com, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net, and shellwikipedia.com, are owned by John Donovan. There is also a Wikipedia segment.