South African Business 2023

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FOCUS South Africa’s oil and gas sector is open for business The application by TotalEnergies for the right to produce signals an exciting new phase. TotalEnergies has submitted an application to Petroleum Agency South Africa (PASA) to convert its exploration right into a production right. The TotalEnergies-led consortium, after making world-class discoveries off South Africa’s southern coast off Mossel Bay in the Outeniqua Basin, has now made the decision to proceed to the next phase, which could have enormous implications for the local, regional and national economy. The next phase, a gas-market development period, is not the same as an immediate decision to start building pipelines and decks, but it is a step along the way. The Luiperd and Brulpadda discoveries were made in the Block 11B/12B areas. The joint venture has decided to give up a northern portion of its right, reducing the proposed area to be worked to 12 000km², whereas the exploration right extended to more than 18 000km². TotalEnergies’ joint venture partners in Block 11B/12B include QatarEnergy and Canadian Natural Resources. A massive rig travelled from Norway to explore off South Africa’s south coast. If the process moves further along to the point where TotalEnergies obtains all the environmental permits it needs and starts to develop the resource, some estimates suggest that gas could begin to flow by 2026. Petroleum Agency SA plays an important role in developing South Africa’s gas market by attracting qualified and competent companies to explore for gas, as in the case of TotalEnergies and its partners. Another major focus is increasing the inclusion of historically-disadvantaged South Africans in the upstream industry. Currently, natural gas supplies just 3% of South Africa’s primary energy. A significant challenge facing the development of a major gas market is the dominance of coal. Opportunities for gas lie in the realisation of South Africa’s National Development Plan (NDP) and the Integrated Resource Plan (IRP). West coast developments While the newspaper headlines focussed mainly on the discoveries off the south-western coast of South Africa, progress was being made off the west coast too. Eco Atlantic Oil & Gas and its partners have hired a rig to start exploring Block 2B, an area which has been of interest to the oil and gas industries for many years. Eco Atlantic Oil & Gas is the operator of Block 2B while Africa Energy, Panoro Energy ASA and Crown Energy AB are other major investors. Block 2B is located in the Orange Basin (see map) where both Total and Shell announced significant oil and gas discoveries offshore Namibia in early 2022. The block covers an area of 3 062km² with water depths from 50 to 200 metres. South Africa shares a geological sedimentary basin with its western neighbour so the announcement by Shell that it had made significant SOUTH AFRICAN BUSINESS 2023 58

oil and gas discoveries in the southernmost sector was welcome news indeed. The discoveries were made at the Graff-1 well. Scientifically, the big takeaway from Shell’s discovery is related to where the finds were made. Previously, it was believed that only gas would be found in one layer of the shelf, known as the Cretaceous sector; Shell found a working petroleum system with oil as a component in the Cretaceous sector. The geological sedimentary basin extends to offshore Cape Town and out to sea, stretching over 160 000km². The rights to the South African southern section of the basin are held by Shell and its partners TotalEnergies and PetroSA. TotalEnergies have themselves had promising early signs of possible oil and gas finds near the Shell find off Namibia, and in the block adjacent to the South African maritime border. This is the Venus-1. The deepwater sector of the South African Orange Basin is unexplored, but similar geology extends south of Namibia into the South African sector. Geological features similar to the Namibian reservoirs have been identified on seismic data in the South African part of the basin, also in the Cretaceous, but these remain to be tested through drilling. New seismic data acquired by the survey planned by the company, Searcher, will assist in reducing exploration risk and help in identifying and quantifying possible oil and gas deposits off South Africa’s west coast. Onshore prospects The Department of Forestry, Fisheries and the Environment (DFFE) in 2022 issued draft regulations to govern the process of hydraulic fracking because Renergen’s Virginia Gas Project is barrelling ahead. the underground resources of the Karoo are again in the spotlight. Various environmental studies are being done, including groundwater and geological studies. The geo-environmental baseline study for gas in Beaufort West undertaken by the Council for Geoscience has been completed and showed significant resources of shale gas. The study did not encompass any economic modelling. PASA will be responsible for the granting of any licences once the draft regulations are finalised. The massive resources of natural gas that Renergen has been working on for the last few years reached commercial production in October 2022 in the northern Free State. Renergen, through its subsidiary Tetra4, is the only holder of an onshore petroleum production licence issued by the Department of Mineral Resources and Energy through the PASA. The production right area covers 187 000 hectares around the towns of Welkom, Virginia and Theunissen. Liquid natural gas for the domestic market and helium for export from this project will create an entirely new stream of energy options for South Africa. ■ 59 SOUTH AFRICAN BUSINESS 2023