PETROLIUM AGENCY SA
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Petroleum Agency SA FEATURE
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hree weeks on and the oil continues to pump from the rogue BP drilling platform in the Gulf of Mexico. It’s the biggest oil disaster in U.S. history and a fractious economy and a fragile ecology will suffer. For BP the total cost of clean up and claims could reach $37 billion says Credit Suisse, and the Financial Times London tells us BP’s head man has admitted error - “BP ‘not prepared’ for spill’” Multi national giant BP has a slogan – ‘Beyond Petroleum.’ The sentiment – and more significantly the principle - is shared by Petroleum Agency South Africa. Though in this case without post-spillage irony.
SA environment protect ‘very strong’ For the Agency exploration goes in lockstep with environmental and resource stewardship. Environmental protection, says Dave van der Spuy, the man responsible for promoting South Africa’s offshore exploration, “plays a “very strong and important part in this organisation. “While we promote oil and gas exploration we are also the regulator. And we have a section that deals specifically with the environment.” Unsurprisingly the lessons and implications of the BP spillage have washed up on the Agency’s front door. “It’s made us look very very closely at the issue of financial guarantees and so on that companies present before being qualified to explore and operate in South Africa,” says van der Spuy, Petroleum Agency SA’s Manager for Resource Evaluation.
SA exploration safeguards ‘up front’ “We’ve always been particularly strong on this point. And I think that unlike many countries, we take the environment into consideration before granting a right. “All the issues around it, impact on environment and so on, have to be www.southafricamag.com
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Petroleum Agency SA FEATURE
investigated, and there should be assurance that exploration and production will not damage the environment or particular issues relating to it. “All of this is done up front, which I think differentiates us from a lot of countries that grant rights and then worry about the environment afterwards. We are very strong on this issue.” The Agency has been soliciting bids for offshore acreage off the Southern and Western coasts of the country. “Currently we have some dozen local and international companies operating off shore South Africa with between 20 and 30 different exploration rights or permits,” says van der Spuy, a 48 year old geologist who began his career with the then national oil company as a geo chemist. ”On shore there are over 40 companies with issued exploration rights and around 60 applications still in process.” Among the possible offshore prospectors is Royal Dutch Shell, which recently won exploration rights in the Orange Basin deepwater area off South Africa’s west coast. The exploration area covers some 37,000 square kilometers - about the size of the Netherlands. Located in water between 500 metres and 4,000 metres deep, it has so far 4
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seen limited exploration activity. “The Orange Basin offers an exciting frontier exploration opportunity to apply the deep water technical ability we have built up around the world over the past three decades,” according to Ceri Powell, Executive Vice President International Exploration. “Things are certainly starting to look up for us so far as exploration is concerned,” says Dave van der Spuy. “The finalisation towards the end of last year of the Royalties Act gave certainties around the last outstanding issues that were preventing international explorers from proceeding with their exploration programmes.”
Offshore activity Onshore activity is concentrated largely on coal bed methane (CBM) in the Karoo coal bearing basin in the north and east. Over 40 licences already issued to companies exploring coal for methane. Anglo Operations, a subsidiary of Anglo American, is among the first to commit itself to the new resource, and plans to drill 39 new boreholes to assess its reserves, believed to exceed one trillion cubic feet. There is also recent and very strong interest in shale gas in the southern Karoo Basin.
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Petroleum Agency SA FEATURE
in certain energy technologies; gas-toliquids, coal-to-liquids, and nuclear pebblebed technologies for example. However deepwater oil success would propel South Africa to the forefront of the continent’s leadership and energy development. And van der Spuy believes upping the percentage is a realistic expectation. “We have areas in the deep water that are as yet completely unexplored. Because of South Africa’s particular history, international exploration obviously stopped as sanctions against the previous regime came into place. “During that time exploration was only through the national oil company and it is only relatively recently that international explorers have returned to South Africa. At the same time the technology to explore in deeper water is becoming available and is being applied.”
Unexplored deep waters
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“So onshore’s looking very interesting. Probably the furthest along is Anglo Operations, working in the Waterburg Basin who has already conducted CBM production tests and appraisals. It seems to us that CBM onshore may develop into a new and quite interesting source of energy. Shale gas of course is completely unknown.” Total hydrocarbon production in South Africa currently accounts for approximately 10% of domestic needs, and compared with some other African states the country is a minor hydrocarbon producer. Small and depleting fields off the south coast in the Bredasdorp Basin have produced up to 25,000 barrels a day of liquids (oil plus condensate) and 190 million cubic feet a day of gas. This production is now in decline.
“The deeper water areas of the west coast south coast and east coasts remain almost completely unexplored. Looking at the existing seismic data that does exist, we have interpreted findings which we think are very encouraging, and I think some of the new operators share these feelings with us. “So yes I do think it is realistic to expect that we could reduce our dependence on imports through a far greater percentage than it is at the moment.” The main challenge for offshore exploration is the remoteness of South Africa from other exploration centres. “It’s difficult to get hold of drill rigs and drill ships at a reasonable rate. The engineering environment has challenges but this is not exclusive to South Africa… you have only to consider those in the North Sea for example.
SA world leader
Infrastructure challenges
But South Africa has a diverse industrial base, and unlike many other African producers, oil and gas exploration is not critical to the economy. It is a world leader
“A further challenge for South Africa is the lack of infrastructure. So if there is a discovery - particularly of gas - it would take time to develop. And in any event the exploration cycle
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is very very long in terms of the expectations of the public, and it will be a number of years before we can say confidently whether something is there or not.” Meantime the promotion of public and industry awareness of what is going on in the country’s oil and gas exploration fields is a crucial part of Petroleum Agency SA’s endeavours. “It’s absolutely important. The oil and gas industry in South Africa doesn’t have a very large presence in the public eye. Indigenous oil and gas provides a very small percentage so it’s very public, and certainly hasn’t the large presence of other extraction sectors like gold and diamond mining. “But I think with the increasing activities that are going on onshore and what we expect offshore in the future, it will become very important for us to increase awareness of the importance the industry is starting to grow for itself. “And a parallel objective is to increase the awareness of the role that Government
is playing – and particularly the Petroleum Agency – in ensuring that resources are exploited in a sustainable and responsible manner. It’s a particular angle of our outreach to the South African market.
International partnerships “Internationally our main aim is to attract explorers to share the risks of exploration with the South African state, and this is handled very much through oil and gas exploration trade shows.” New legislation has brought enhanced stability and equability. And with it says Dave van der Spuy, “a new interest in exploration in South Africa for onshore and unconventional sources of gas such as CBM and shale gas. Also for conventional exploration offshore for gas and oil, with new opportunities in deeper water. “Our message to the South African public and beyond is that this new interest and exploration will - hopefully in a few years time - reduce our imports of oil and gas.” END www.southafricamag.com
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