South African Business 2022

FOCUS Gas will help

FOCUS Gas will help South Africa achieve net zero Gas can drive an economic recovery at the same time as building a bridge to a clean energy future, writes Petroleum Agency South Africa CEO, Dr Phindile Masangane. The biggest threat to humanity is climate change and the biggest threat to South Africa’s social stability is the high unemployment rate, which has primarily been caused by economic stagnation. As the global economy recovers from the devastating effects of Covid-19, demand for oil and gas has gone up significantly. If there was ever a need for proof that oil and gas still drive the global economy, recent statistics demonstrate the trend. The world’s developed economies industrialised on the back of oil and gas production and use. Now, just as Africa is on the cusp of being a significant gas producer and is making plans to use such gas for power generation, industrialisation and economic growth, the negative effect of greenhouse gas emissions on the environment has become undeniable. The urgency for action to mitigate the risk of climate change is no longer debatable. As a responsible global citizen South Africa must take steps to reduce its carbon footprint. The UN Framework Convention on Climate Change was established in 1992 to coordinate the global response to mitigate the threat of climate change, and specifically to get countries to commit to policies and plans that will ensure that the average global temperature rise is kept less than 1.5°C above pre-industrial levels. The International Energy Agency (IEA) proposes that to achieve this goal the world’s energy sector must reach net zero emissions by 2050. Country-specific pathways The IEA “Net Zero by 2050” report acknowledges that there will be a differentiated approach to a clean energy future, taking into consideration the cost of the new clean energy technologies and the economic consequences of transitioning for each country. The IEA emphasises that each country must develop its own pathway to a net zero emission future. South Africa’s economy has been predominantly powered by coal, which is also a significant contributor to the country’s economy in terms of GDP as well as employment. Of all primary energy resources coal is the most carbon-intensive, and South Africa therefore has a relatively high carbon-intensive economy, contributing about 1% of annual global greenhouse gas emissions. In addition to coal, South Africa imports oil, gas and petroleum products for its energy needs as the upstream petroleum industry is still at a nascent stage. The two recent world-class gas discoveries in the Outeniqua SOUTH AFRICAN BUSINESS 2022 56

asin off the south coast of the country are the biggest petroleum discoveries made in South Africa. The development of these discoveries 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. Gas is therefore an obvious bridge to a lower carbon future in South Africa. Importantly, these gas discoveries could restore the gas-to-liquid refinery in Mossel Bay to full production and profitability, saving about 1 200 direct 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. The Petroleum Agency South Africa awaits the licensee of these gas discoveries submitting its production right and environmental authorisation applications when the exploration right expires, or earlier. The agency expects the licensee to use world-class technologies and standards to minimise the effects of the gas and gas condensate production on the environment, while maximising the in-country benefit or local content from this development to support South Africa’s economic recovery. These discoveries could indeed support both the country’s economic recovery and its transition to a clean energy future. ■ Credit: Anton Swanepoel Exciting discovery off Southern Cape coast In 2019 Total and its partners created a stir with the announcement that gas condensate had been found at a site called Brulpadda off the coast of Mossel Bay. In 2020, the nearby Luiperd prospect in Block 11B/12B delivered more exciting news. The block, in the Outeniqua Basin 175km off the southern coast, covers an area of about 19 000km² in water depths of 200m to 1 800m. The exploration was done by the semi-submersible rig Deepsea Stavanger (pictured), which journeyed twice from Norway to lead the exploration projects. The Luiperd prospect is the second of five prospects in the group. Light oil and gas condensate were discovered in significant quantities. The exploration drilling is in deep waters similar to where the gigantic Mozambique Rovuma Basin gas discoveries were made in 2011 and 2012. These discoveries have exciting repercussions for the development and growth of South Africa’s oil and gas sector. If the local gas market is to take off and thrive, significant drilling has to take place. 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. Increased confidence by such companies can only lead to growth in the industry and with the gas finds off Mozambique there are sure to be more companies interested in South Africa’s potential. In addition to adjudicating on coastal fields, the agency has awarded coalbed-methane-gas exploration rights in KwaZulu-Natal and natural gas exploration permits in the Free State. 57 SOUTH AFRICAN BUSINESS 2022