FOCUS Gas could bolster the Western Cape economy

Applications to Petroleum Agency South Africa for production rights hold enormous potential for a wide-ranging economic stimulus.

In September 2022 TotalEnergies and its partners submitted an application for a production right to Petroleum Agency South Africa (PASA) for its recent discoveries in Block 11B/12B off the coast of Mossel Bay.

This is an event that is even more exciting than the initial finds of significant resources in the blocks because if production happens, then the gas-toliquid (GTL) refinery at Mossel Bay that has run out of feedstock could live again. This would have a significant economic impact, not only on the town, region and province, but on the national economy.

The project is not quite “shovel ready” as the company and its associates are still to go through what is known as a “Gas Market Development Period”. This is essentially a feasibility study.

Block 11B/12B is in the Outeniqua Basin approximately 175 kilometres off the southern coast of South Africa, with the coastal town of Mossel Bay being the closest settlement. The block contains the Brulpadda and Luiperd discoveries which were made in 2019 and 2020. Both wells were drilled by Odfjell Drilling’s Deepsea Stavanger semi-submersible rig.

Although the consortium is giving up the rights to a certain part of the original block, TotalEnergies’ selected block will still cover about 12 000km2.

Economic benefits

An oil-discharge terminal was created in the sea off Mossel Bay in 1960 but it was not until the commissioning of the GTL refinery in 1992 that the town experienced a boom related to these gas facilities.

After many years of production, the Mossgas project ran out of feedstock. In 2019 President Cyril Ramaphosa announced in parliament that the facility would close down. Some estimates put the number of potential job losses at 1 200.

However, if the above-mentioned feasibility returns a positive answer, the GTL refinery could be restored to full production and profitability, saving those jobs. A complete shutdown and abandonment of this refinery would not only lead to job losses at the refinery, but the effects would reverberate throughout the town of Mossel Bay and the Southern Cape region since the refinery contributes about R2-billion a year, or 26% of the Mossel Bay economy, and 6% to the Southern Cape economy when producing at full capacity.

If this gas were to be piped to 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 R26.5-billion 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.

Furthermore, gas from the discovered blocks has the potential to replace more than 2 300MW of diesel-fired electricity generation in Gourikwa, Dedisa and Ankerlig, thereby reducing the carbon emissions from these plants by more than 50% while eliminating sulphur oxide and nitrogen oxide emissions, which are also harmful to the environment. In this way, gas can be seen as a bridge to a lower-carbon future in South Africa.

PASA’s role

At the same time as TotalEnergies was applying to start producing, commercial operations of Tetra4’s natural gas project in the north-eastern Free

State came on stream. These two events prove that investors continue to see the value of South African resources.

Both of these projects came about through the licensing authority of Petroleum Agency South Africa (PASA), reporting to the Minister of Mineral Resources and Energy (DMRE). PASA regulates and monitors exploration and production activities and is the custodian of the national exploration and production database for petroleum.

In terms of strategy, the agency actively seeks out technically competent and financially sound clients to whom it markets acreage, while ensuring that all prospecting and mining leases are for the long-term economic benefit of South Africa. As custodian, PASA ensures that companies applying for gas rights are vetted to make sure they are financially qualified and technically capable, as well having a good track record in terms of environmental responsibility. Oil and gas exploration requires enormous capital outlay and can represent a risk to workers, communities and the environment. Applicants are therefore required to prove their capabilities and safety record and must carry insurance for environmental rehabilitation.

Environmental issues are increasingly playing a big part in discussions about how best to utilise South Africa’s natural resources. As part of an attempt to engage in a broader discussion on policy issues, a joint colloquium was held in 2022 on the subject of how to balance South Africa’s energy needs with the country’s climate change commitments. The colloquium, and several online events which prepared for and anticipated the main event, was jointly hosted by the DMRE, the Department of Forestry, Fisheries and the Environment (DFFE) and PASA. ■