Oil, gas and petrochemicals

Oil and gas

The Central Energy Fund has become a shareholder in a Free State gas project.

Renergen’s Virginia Gas Project has passed several significant milestones. Credit: Renergen

South Africa’s reserves of shale gas and coal-bed methane are set to be exploited and in 2022, the Department of Forestry, Fisheries and the Environment signed off on the map (see Energy Overview) of where nine strategic pipelines will go.

The pipelines are consistent with planning for future gas exploration projects and coincide to some degree with planned Renewable Energy Development Zones (REDZs) but have caused some consternation among environmentalists.

Air Liquide Large Industries South Africa Air is to start operating 16 air separation units (ASUs) as a result of an R8-billion purchase of a plant in Mpumalanga from Sasol. The company’s fleet now comprises 17 ASUs in Secunda, with the units having the capacity to produce 42 000 tons per day of oxygen.

Sasol announced in 2021 that it was to sell a 30% stake in the Romco natural gas pipeline that links Mozambique and South Africa. As part of a global sell-off of assets to reduce debt, Sasol expects to earn more than R5-billion from the transaction. The company will continue to be the pipeline’s operator and maintains a 20% stake in the venture.

The Romco pipeline could carry far more gas in the future as there have been big finds of new gas off the coast off Mozambique which could be shipped as liquefied natural gas

SECTOR INSIGHT Routes for nine major pipelines have been gazetted.

(LNG) to Maputo and continue from there to the Sasol plant at Secunda. The Liquefied Natural Gas Independent Power Producer Procurement Programme (LNG IPPPP) is part of the broader programme of the National Department of Mineral Resources and Energy which encourages private investment in renewable energy, namely the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP). The total allocated to gas-to-power in the national power plan is 3 726MW, of which 3 000MW is for LNG.

Three natural gas exploration permits have been awarded to Tosaco Energy for the sandstone-rich area between Amersfoort and Balfour in the western part of Mpumalanga by Petroleum Agency South Africa (PASA). Tosaco Holdings has a 25% stake in Total SA. Two methane-gas exploration rights have been granted to Highland Exploration in the Evander area. PASA regulates exploration and production activities, and acts as the custodian of the national petroleum exploration and production database.

Gas is expanding

What to do with redundant power stations is a question testing the best minds in the country. Eskom has decided that some of its sites can become locations for renewable energy plants, given that they are already connected to the grid.

And in 2022 came news that Majuba Power Station is the site of a successful bid to drill for gas. Australian company Kinetiko Energy aims to supply Majuba’s 20MW gas generator with fuel. Majuba is one of Eskom’s many coal-fired power stations which are facing closure in the province of Mpumalanga and one of several that might be switched to gas.

Kinetiko has a further two sites where it will do exploratory drilling: one near Sasol’s Secunda synthetic fuel plant and one to the south of that. A major milestone was achieved in July 2022 for the Virginia Gas Project, owned by Renergen subsidiary Tetra4. That was when “natural gas to plant” was achieved. This test allows for the system to be comprehensively tested, with the inlet line from the gas-gathering system opened to the process plant and then on to the natural gas filtration and pre-compression system.

In September, commercial operations of the company’s liquified natural gas (LNG) plant began. Helium production will follow.

Whereas it took nine years to find the R1.2-billion needed to fund the first phase of Virginia Project, investors are now looking very keenly at its prospects. An amount of R3.6-billion has been invested by Ivanhoe Mines to secure some offtake rights and the Central Energy Fund has purchased a 10% stake in Tetra4 for R1-billion.

Sproule, a resources accreditation agency, has given an updated report on the helium and methane reserves in the Virginia gas field. The results were even more positive than previous estimates, with helium reserves up by 620% and methane reserves by 427%. The field covers 187 000ha in the region of Virginia, Theunissen and Welkom.

The SpaceX rocket that launched in 2021 used 11 tons of helium to propel itself off the ground. Every computer microchip in the world is produced in the presence of helium and the world uses 85 tons of it every day. Exciting offshore gas discoveries have also been made in recent years. Total and its partners first announced success at a site called Brulpadda off the coast of Mossel Bay. The nearby Luiperd prospect in Block 11B/12B delivered more exciting news when gas condensate was also found there.

The block, in the Outeniqua Basin 175km off the southern coast, covers an area of about 19 000km² in water depths of 200m-1 800m.

The two finds raise the odds of Total investing in what it calls a “world-class” offshore gas site. The drilling campaign employed 195 South Africans with specialist skills but the potential spinoff is enormous for the Western Cape and South Africa, if the find leads to drilling and commercialisation.

PASA has noted the significance of international oil companies committing to exploration off South Africa’s coast. More exploration will guarantee that interest is maintained. ■

ONLINE RESOURCES

Council for Geoscience: www.geoscience.org.za Petroleum Agency South Africa: www.petroleumagencysa.com South African Oil and Gas Alliance: www.saoga.org.za South African Petroleum Industry Association: www.sapia.co.za

South Africa’s oil and gas sector is open for business

The application by TotalEnergies for the right to produce signals an exciting new phase.

TotalEnergies has submitted an application to Petroleum Agency South Africa (PASA) to convert its exploration right into a production right.

The TotalEnergies-led consortium, after making world-class discoveries off South Africa’s southern coast off Mossel Bay in the Outeniqua Basin, has now made the decision to proceed to the next phase, which could have enormous implications for the local, regional and national economy. The next phase, a gas-market development period, is not the same as an immediate decision to start building pipelines and decks, but it is a step along the way. The Luiperd and Brulpadda discoveries were made in the Block 11B/12B areas.

The joint venture has decided to give up a northern portion of its right, reducing the proposed area to be worked to 12 000km², whereas the exploration right extended to more than 18 000km².

TotalEnergies’ joint venture partners in Block 11B/12B include QatarEnergy and Canadian Natural Resources.

If the process moves further along to the point where TotalEnergies obtains all the environmental permits it needs and starts to develop the resource, some estimates suggest that gas could begin to flow by 2026.

Petroleum Agency SA plays an important role in developing South Africa’s gas market by attracting qualified and competent companies to explore for gas, as in the case of TotalEnergies and its partners. Another major focus is increasing the inclusion of historically-disadvantaged South Africans in the upstream industry.

Currently, natural gas supplies just 3% of South Africa’s primary energy. A significant challenge facing the development of a major gas market is the dominance of coal. Opportunities for gas lie in the realisation of South Africa’s National Development Plan (NDP) and the Integrated Resource Plan (IRP).

West coast developments While the newspaper headlines focussed mainly on the discoveries off the south-western coast of South Africa, progress was being made off the west coast too.

Eco Atlantic Oil & Gas and its partners have hired a rig to start exploring Block 2B, an area which has been of interest to the oil and gas industries for many years. Eco Atlantic Oil & Gas is the operator of Block 2B while Africa Energy, Panoro Energy ASA and Crown Energy AB are other major investors.

Block 2B is located in the Orange Basin (see map) where both Total and Shell announced significant oil and gas discoveries offshore Namibia in early 2022. The block covers an area of 3 062km² with water depths from 50 to 200 metres.

South Africa shares a geological sedimentary basin with its western neighbour so the announcement by Shell that it had made significant

A massive rig travelled from Norway to explore off South Africa’s south coast.

oil and gas discoveries in the southernmost sector was welcome news indeed. The discoveries were made at the Graff-1 well.

Scientifically, the big takeaway from Shell’s discovery is related to where the finds were made. Previously, it was believed that only gas would be found in one layer of the shelf, known as the Cretaceous sector; Shell found a working petroleum system with oil as a component in the Cretaceous sector. The geological sedimentary basin extends to offshore Cape Town and out to sea, stretching over 160 000km². The rights to the South African southern section of the basin are held by Shell and its partners TotalEnergies and PetroSA.

TotalEnergies have themselves had promising early signs of possible oil and gas finds near the Shell find off Namibia, and in the block adjacent to the South African maritime border. This is the Venus-1. The deepwater sector of the South African Orange Basin is unexplored, but similar geology extends south of Namibia into the South African sector.

Geological features similar to the Namibian reservoirs have been identified on seismic data in the South African part of the basin, also in the Cretaceous, but these remain to be tested through drilling. New seismic data acquired by the survey planned by the company, Searcher, will assist in reducing exploration risk and help in identifying and quantifying possible oil and gas deposits off South Africa’s west coast.

Onshore prospects The Department of Forestry, Fisheries and the Environment (DFFE) in 2022 issued draft regulations to govern the process of hydraulic fracking because the underground resources of the Karoo are again in the spotlight.

Various environmental studies are being done, including groundwater and geological studies. The geo-environmental baseline study for gas in Beaufort West undertaken by the Council for Geoscience has been completed and showed significant resources of shale gas. The study did not encompass any economic modelling.

PASA will be responsible for the granting of any licences once the draft regulations are finalised.

The massive resources of natural gas that Renergen has been working on for the last few years reached commercial production in October 2022 in the northern Free State. Renergen, through its subsidiary Tetra4, is the only holder of an onshore petroleum production licence issued by the Department of Mineral Resources and Energy through the PASA.

The production right area covers 187 000 hectares around the towns of Welkom, Virginia and Theunissen.

Liquid natural gas for the domestic market and helium for export from this project will create an entirely new stream of energy options for South Africa. ■

Renergen’s Virginia Gas Project is barrelling ahead.

Driving socio-economic growth

Petroleum Agency South Africa assigns exploration and production rights to bolster the country’s economy.

South Africa is a net importer of fuel and the country’s refining capacity has been reduced in recent years.

To counter this trend, exploration has been on an upward trajectory. Partly this is explained by growing certainty in the regulatory environment and by the good work done by Petroleum Agency South Africa (PASA), the agency which evaluates, promotes and regulates oil and gas production in the country. This has seen increased interest in South Africa’s potential as a destination for investment dollars.

Underpinning PASA’s strategy is the need to ensure that all prospecting and mining leases are for the long-term economic benefit of South Africa. This applies to every kind of licence issued by the agency, be it in old technologies or new.

Just Energy Transition PASA also has to deal with the global desire to move away from fossil fuels and to start using cleaner, renewable energy.

Is it possible to grow the economy by exploiting the country’s natural resources and start moving to a greener future? PASA CEO Dr Phindile Masangane not only thinks it’s possible, she insists that it’s something South Africa must do.

Dr Masangane points out that with South Africa’s excellent solar resources it makes sense to localise the solar value chain to boost manufacturing but the country should not ignore what it has. “At the same time, we know that the gas value chain is well established in the country, so let’s also capitalise on that.”

The multiple uses of gas could play a major role in helping South Africa transition away from fossil fuels while at the same time boosting economic growth. “We need gas not just in electricity and transport,” noted Dr Masangane, “but importantly for South Africa, which is in desperate need of an economic turnaround, is for us to use this gas for our manufacturing industry.”

Referencing a section on gas in a report on energy in Africa by the International Energy Agency, Dr Masangane says, “Most of what Africa produces is actually exported out of the continent.” The report notes that Africa accounts for less than 3% of the world’s energy-related carbon dioxide emissions. Says Dr Masangane, “This report calls for us as Africa to extract the gas and produce it and use it not just to power the continent but to reindustrialise the continent and industrialise for the first time some countries on the continent.”

Potential impact The gas discoveries that have been made off the coast of South Africa (near Mossel Bay), when linked with the massive finds off the coast of Mozambique and the enormous potential that exists in fields off the west coast, amount to what could become a massive change in the regional economy. TotalEnergies and its partners have deployed the

The Mossgas facility at Mossel Bay could be revitalised if new finds are turned into gas production.

Deepsea Stavanger offshore drilling rig and they have achieved significant successes. The two fields where finds have been made are called Luiperd (where 2.1-trillion feet of contingent gas resources has been found, enough to power a medium-sized city for five years) and Brulpadda (1.3 Tef), which are part of Block 11B/12B.

If this gas were to be piped to the existing gas-to-liquid plant at Mossel Bay, Mossgas, then instead of spending about R12-billion on decommissioning the plant, the facility could instead start generating R22-billion in taxes and royalties and save South African taxpayers R26.5billion through not having to import oil and refined products.

PASA estimates that the gas found in these blocks could produce 560-million cubic feet per day of gas for more than 15 years. TotalEnergies’ expenditure on stream phase one could amount to $3-billion in 2027 and create 1 500 direct jobs, 5 000 indirect jobs and increase the country’s gross domestic production by R22-billion.

The plan is to run the gas via a pipeline to a new fixed steel platform, and from there to use the existing pipeline to get the gas to Mossgas. Up to 18 000 barrels per day of condensate and 210-million cubic feet per day (MMcfd) are expected to be pumped to the facility. Gas condensate is a hydrocarbon liquid stream separated from natural gas and is used for making petrol, diesel and heating oil. ■

DATABASE MANAGEMENT

The continental shelf of the Republic of South Africa covers some 200 000km² and the country has a coastline approximately 3 000km in length.

Petroleum Agency SA is responsible for the archive and management of the national hydrocarbon exploration database on behalf of the State. It has digitised, indexed and archived all of the data and reports resulting from the drilling of more than 300 offshore and some 200 onshore boreholes. The exploration database also includes seismic field and processed data for more than 300 000km of 2D and 40 000km² of 3D seismic data that was acquired offshore and some 9 800km of seismic processed data that was acquired during the late 1960s in the Karoo, Algoa and Zululand onshore basins.

Being the custodian of the National Petroleum Exploration and Production Database of South Africa, the Agency relies on a sustainable and effective Information Management Infrastructure in order to comply with its mandate to: • archive and maintain a database on petroleum exploration and production data • provide access to existing data, cores, well samples, information and literature on request • add value and incorporate new as well as interpreted data into the database • maintain records of all hydrocarbon exploration and production activities.

PASA CEO Dr Phindile Masangane