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South African Business 2022

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Welcome to the 10th edition of the South African Business journal. First published in 2011, the publication has established itself as the premier business and investment guide to South Africa, supported by the website Regular pages cover all the main economic sectors of the South African economy and give a snapshot of each of the country’s provinces. This issue has a focus on Special Economic Zones which are being rolled out across the country with specific economic areas of focus. The importance of the revival of minerals exploration and the significance of onshore and offshore gas discoveries is the subject of another special feature.

OVERVIEW Oil, gas and

OVERVIEW Oil, gas and petrochemicals Offshore gas discoveries could boost South Africa’s economy. SECTOR INSIGHT A helium project in the Free State is set to join an elite club. The Virginia Gas Project is ramping up. Credit: Renergen South Africa has set a target of 3 000MW of gas power in the national grid by 2030. This is laid out in the country’s most recent Integrated Resources Plan (IRP), which guides national targets in each of the various methods of power generation and which is tilted towards renewable energy. Although there have been encouraging finds off the southern coast of South Africa and prospects for shale gas appear to be good in the country’s interior, it has been pointed out by the commercial growth director of GE Gas Power for Sub-Saharan Africa, Michael Konadu, that these prospects are yet to be commercialised. When this fact is added to the logistical difficulties and security concerns surrounding the gas resource available from Mozambique, Konadu argues that liquified natural gas (LNG) should be the vehicle for meeting the objectives of the IRP and the national Gas Master Plan. His preferred method would be for a consortium to assume project risk, including terminal and plant infrastructure. The state could take a stake through Transnet or the Central Energy Fund. Whether it is via new imports of LNG or the development of the Brulpadda and Luiperd prospects off the southern coast, there is no doubt that new feedstock is needed for the PetroSA GTL refinery at Mossel Bay. Commissioned in 1992 as the world’s first gas-to-liquids (GTL) refinery, it plays an important role in the regional and national economy but it has effectively run out of feedstock. The entity is considering extracting geothermal energy from nine of its wells that are now depleted of gas as a way of fending off decommissioning. Total E&P South Africa BV, the operator and majority stakeholder in the joint venture which is drilling, has not yet taken a decision about what further steps it might take now that the first drilling operations have been shown to be successful. The drilling was successful enough to warrant the return of the semi-submersible rig Deepsea Stavanger from Norway to South Africa and in August 2020 the rig made more discoveries at the nearby Luiperd prospect. The JV partners are Qatar Petroleum International Upstream LLC, CNR International and Main Street 1549 Proprietary Ltd. Petroleum Agency South Africa (PASA), which encourages exploration and regulates the oil and gas industry, has noted the significance of international oil companies committing to exploration off South Africa’s coast. Another drilling project was launched in September 2020 in the Karoo. The Council for Geoscience (CGS) announced phase two of the Karoo Deep Drilling and Geoenvironmental Baseline Project SOUTH AFRICAN BUSINESS 2022 54

Offshore gas finds could revitalise the gas-to-oil facility at Mossel Bay. Credit: PASA (KDD) in Beaufort West. The geoscientific research project in the Karoo Basin is aimed at developing a geo-environmental baseline model with a focus on assessing the potential environmental impacts of shale gas development. A Gas Utilisation Master Plan (GUMP) is being developed as a part of national energy policy. Private companies are responding to this changed environment. Tetra4, a subsidiary of Renergen, owns rights to a field of liquified natural gas (LNG) in the Free State and has started ramping up to the next (production) phase of the Virginia Gas Project. The pilot compressed natural gas (CNG) plant was constructed in 2016. The helium concentration tested by Renergen is at an excellent level and in line with early indicators. So good were the helium flow results announced in early November 2021 that the company’s share price shot up by 14.3% on a single day. The aim in phase one is to produce 350kg/d of helium via cryogenic liquification and to construct a commercial LNG plant. When the project comes on stream, it will become one of just 16 such facilities in eight countries globally. Production of helium is expected to grow to five tons in the second phase. 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. Although it’s a very useful element, it’s also a very difficult element. Renergen has had to import much of its equipment and many skilled personnel. First to respond to the potential of this gas find was the logistics sector. Bulk Hauliers International Transport (BHIT) and South African Breweries signed agreements to take LNG to fuel some of its trucks, which should lead to lower operating and maintenance costs. ONLINE RESOURCES National Energy Regulator of South Africa: South African National Energy Association: South African Petroleum Industry Association: Renergen has signed an agreement with TotalEnergies for distribution and sale and the potential of another market was revealed in 2021 when Renergen agreed to sell LNG to glass manufacturer Consol. Bespoke depots will be developed. International chemicals and energy company Sasol has several large plants in Mpumalanga and the Free State. Sasol Gas is one of the four Sasol operations at Secunda, supplying natural gas to Sasol Synfuels and buying Sasol Synfuels’ methanerich pipeline gas. Air Liquide Large Industries SA, a subsidiary of French company Air Liquide, has purchased Sasol’s oxygen production site in Secunda for R8.5-billion. Sasol is selling a number of its assets in an effort to reduce debt. Most of the oil that feeds the country’s four crude-oil refineries is imported. The refineries are in Cape Town, Sasolburg and Durban (two). In addition to South Africa’s crude-oil refineries, natural-gas conversion plant, coal-to-fuel and gas-to-liquid crude-oil refineries, Sasol produces fuel from coal at its Secunda facility. ■ 55 SOUTH AFRICAN BUSINESS 2022

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