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Opportunity Issue 104

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Opportunity magazine is a niche business-to-business publication that explores various investment opportunities within Southern Africa’s economic sectors. The publication is endorsed by the South African Chamber of Commerce and Industry (SACCI).


EXPLORATION Oil and gas discoveries have vast potential Petroleum Agency South Africa sees gas as a way of transitioning to a greener future. The extensive Brulpadda and Luiperd discoveries recently made by TotalEnergies and its partners have opened up a world-class hydrocarbon play in the deep ocean off South Africa’s south coast. Petroleum Agency South Africa (PASA) is charged with encouraging and regulating the exploration and sustainable development of oil and gas, thereby contributing to energy security for South Africa. These discoveries are extremely encouraging, and all evidence suggests far more potential in the area. What is more, the consortium applied for a licence to produce in 2022, a promising sign for the creation of a gas market in South Africa. More specifically, it opens up the prospect of reviving Mossgas, the gas-to-liquid facility in the coastal town of Mossel Bay. The field called Luiperd (where 2.1-trillion feet of contingent gas resources has been found, enough to power a city the size of East London for five years) and the other one, Brulpadda (1.3 Tef ), are part of Block 11B/12B. 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 -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. One of the most important roles that PASA plays is to evaluate the credentials of potential explorers or developers. Applicants must demonstrate that they have the technical capability and financial resources to carry out the work programmes agreed, as well as any future development that may ensue. A track record of experience, a good health and safety record, environmental compliance record and compliance with oilfield practice is essential. At the same time, PASA is determined to increase involvement of local companies in the upstream industry and to develop local capacity. One way of achieving this is through partnerships between international and local companies. Gas as a transitional resource The transition to cleaner fuels and renewables is inevitable if the world is to reduce the negative impact of climate change. South Africa is a signatory to the Paris Agreement and has committed to a “Peak-Plateau-Decline” carbon emission trajectory. The government’s policy is to diversify the country’s energy mix which is currently coaldominated to a lower-carbon future by introducing proportionately higher renewable-energy resources such as wind and solar into the energy mix as well as gas-to-power. Gas burns with less than half the CO2 emissions from coal and additionally has no SOx emissions. Gas is therefore a suitable transition fuel towards a lower-carbon economy for South Africa especially since gas-to-power technologies 36 |

EXPLORATION are flexible and would therefore complement the intermittent renewable energy being added to the national grid. Africa Energy Outlook 2022, a report produced by the International Energy Agency (IEA), makes the point that Africa has barely begun to properly exploit its hydrocarbon resources. Dr Phindile Masangane, PASA’s CEO, references the report’s statistics to support her contention that Africa could comfortably continue to export oil and gas even if it started using much more for its own use. As she told a Moneyweb podcast, “We just need to make sure that the primary production is used for developing Africa.” A lot of that produce, she argues, should be used “for our economic development and reindustrialisation”. Another benefit of the IEA report is that it demystifies some preconceptions about gas. Says Masangane, “I think there is a misconception – sometimes I think it is deliberate – that the use of oil and gas is not consistent with the decarbonisation strategy. The report unpacks that.” Many of the 600-million African citizens who are without electricity use distinctly environmentally-unfriendly methods to cook. Masangane notes, “If they were to use gas, whether it is LPG or natural gas or another form of gas for cooking, that in itself is decarbonisation because then you arrest the negative impact of deforestation.” She describes as a “false narrative” the idea that the use of oil and gas cannot be part of a decarbonisation strategy and is pleased that the IEA report puts that argument to rest. The transport sector is another place where gas can play a role in helping South Africa’s (and the continent’s) transition to a lowercarbon environment. The uptake of electric vehicles in Africa is very low, with diesel and the international combustion engine continuing to dominate. “Now we have seen a trend lately,” says Masange, “where heavy vehicles switch to natural gas and that reduces your carbon emissions by more than 30%.” The amount of fine particulate matter (air pollutants) is reduced in this way, which cleans up the environment and helps with the decarbonisation strategy. Mossgas will again become a vital part of the fuels industry if feedstock starts flowing from the promising Brulpadda and Luiperd discoveries made off the south coast. TotalEnergies and its partners applied for a production licence in 2022. Petroleum Agency SA @sa_petroleum Petroleum Agency of South Africa @petroleumagency

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