Oil and gas

A production rights request follows significant offshore gas finds.

Sector Insight

The national regulator has approved a gas plant for Richards Bay.

Western Cape and South Africa, if the find leads to drilling and commercialisation.

As David van der Spuy, Manager: Resource Evaluation Manager at PASA, explains, “It is critical for the development to go ahead, not only because it will avert the closure of the gasto-liquids (GTL) plant in Mossel Bay and the loss of 1 500 direct jobs, but also because of the economic effects this will have on the surrounding area.”

PASA has noted the significance of international oil companies committing to exploration off South Africa’s coast and has a stated goal to move beyond exploration to development and production. More exploration will guarantee that interest is maintained.

TotalEnergies has applied to Petroleum Agency South Africa (PASA) to convert its exploration right into a production right, a move that may have major significance for the oil and gas sector in the region.

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. The exploratory drilling campaign employed 195 South Africans with specialist skills, but the potential spinoff is enormous for the

The next phase of the project, 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.

Another area of considerable interest is Block 5/6/7 off the West Coast. Says Van der Spuy, “The area under licence is bigger than the licence area of the south coast and in our opinion holds great potential. TotalEnergies and its partners have submitted a work programme for initial drilling of up to five exploration wells in the area.”

A major milestone was achieved in July 2022 for the Virginia Gas Project in the Free State, 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 2023, commercial operations of the company’s liquified natural gas (LNG) plant began. Helium production will follow but at the time of writing some delay had been experienced. 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.

Gas future

Van der Spuy reports that apart from the biogenic gas discovery being worked on by Tetra, the country also has “other types of unconventional gas onshore, such as coal-bed methane and shale gas”.

The National Energy Regulator of South Africa (Nersa) has approved an application from national utility Eskom to build a 3 000MW gas power station in Richards Bay.

An allocation of 3 126MW to natural gas has been made in the national medium-term energy policy to 2030. The National Department of Mineral Resources and Energy allocated one of the first two gas-topower plants to be constructed under the Independent Power Producer Procurement Programme (IPPPP) to Richards Bay. This has the potential to turn the Richards Bay Industrial Development Zone (RBIDZ) into an energy hub.

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

Another site has been identified within the Coega SEZ in the Eastern Cape but no plans have been published. The Western Cape Provincial Government is lobbying for Saldanha to receive a licence to run such a plant.

Environmental groups have lodged appeals in an attempt to stop the building of the plant, which is a step along the pathway outlined by national government to use gas as a “transitional fuel”, away from fossil fuels towards greener sources of power.

In reaction to the announcement in 2022 by Shell Downstream South Africa and bp Southern Africa of a “spend freeze” and a pause in operations at the SAPREF oil refinery in Durban, the Provincial Government of KwaZuluNatal intends facilitating meetings with these companies and other interested parties to try to find a way to restart operations. The refinery accounts for roughly 35% of the country’s refinery capacity and is likely to be offered for sale.

Durban’s other oil refinery, Enref, was hit by a fire in December 2020 and there are plans to convert it to a storage facility. Astron Energy’s 100 000 b/d refinery Cape Town resumed operations in 2023 after being offline for nearly three years. A fire closed the refinery in 2020. Natref in Sasolburg is South Africa’s only inland crude oil refinery and is a joint venture between Sasol Oil and Total South Africa. ■