By NJ Ayuk<\/p>\n\n\n\n
When South Africa entered the year 2023, it did so as a country that was thoroughly dependent on imports to meet its demand for natural gas. This is, to say the least, an uncomfortable place to be for a country that was also in an energy crisis \u2013 and that was also trying to implement an energy transition program in which gas would help replace coal, a higher-emissions fuel.<\/p>\n\n\n\n
Certainly, as explained in \u201cThe State of South African Energy,\u201d a new report prepared by the African Energy Chamber, South Africa does produce some of its own gas. Specifically, state-owned PetroSA extracts gas from several shallow-water blocks off the southern coast. But these blocks are all mature and in decline; they don\u2019t even yield enough to cover a quarter of total demand. Instead, the country relies on gas imports, which come in via pipeline from Mozambique. It hopes to start importing LNG from Mozambique via tanker and has also talked about securing gas from neighboring Namibia, which is looking to fast-track its new discoveries in the Orange basin. However, neither of these alternatives will be available for several years, so for now, the ROMPCO line to Secunda is the only inbound route.<\/p>\n\n\n\n
It doesn\u2019t have to remain this way, of course.<\/p>\n\n\n\n
I\u2019ve written before about the need for South Africa\u2019s government to break the deadlock so that France\u2019s TotalEnergies can push ahead with the development of Block 11B\/12B, the offshore license area that includes at least two massive natural gas and gas condensate fields in the Outeniqua basin: Brulpadda and Luiperd<\/p>\n\n\n\n
But, with pressure mounting for South Africa \u2014 and the African continent \u2014 to leave fossil fuel resources in the ground to support global net zero ambitions, I believe we should address South Africa\u2019s natural gas discoveries again and discuss their potential impact on the country.<\/p>\n\n\n\n
Potential Power Generation<\/strong><\/p>\n\n\n\n For decades, oil and gas exploration in South Africa had yielded what our report describes as \u201cscattered and sporadic success.\u201d<\/p>\n\n\n\n But all of that changed in 2019 when Total (now TotalEnergies) announced its Brulpadda discovery, followed by the Luiperd discovery one year later. Brulpadda Field is estimated to hold at least 275 million barrels of oil equivalent (MMboe), and Luiperd\u2019s estimated reserves are approximately 340 MMboe, with 70% gas each in both discoveries.<\/p>\n\n\n\n These numbers are huge and among the largest made in our continent in their respective years.<\/p>\n\n\n\n \u201cBrulpadda accounted for 10% of the overall discovered volumes in Africa in 2019, and Luiperd accounted for a whopping 80% of the overall volumes discovered in 2020<\/em>,\u201d our report notes.<\/p>\n\n\n\n When the Brulpadda and Luiperd fields come online, their cumulative average output is estimated to be around 35,000 barrels per day of liquids and about 100,000 barrels of oil equivalent per day (boepd) of natural gas.<\/p>\n\n\n\n What could this mean for South Africans?<\/p>\n\n\n\n With this gas, struggling coal-fired power plants like the Gourikwa and Dedisa stations could be converted to run on baseload gas, meaning South Africans would have a clean, reliable source of electricity.<\/p>\n\n\n\n And while gas-to-power projects would meet an urgent need, that wouldn\u2019t be the only benefit of harnessing the Luiperd-Brulpadda gas.<\/p>\n\n\n\n As our report states, the Petroleum Agency of South Africa (PASA) estimates that the Block 11B\/12B project has the potential to create 1,500 direct jobs and 5,000 indirect jobs and boost the country\u2019s annual gross domestic production (GDP) by 22 billion rand. The agency estimates the block will also benefit South Africa\u2019s balance of payments by 26.5 billion rand each year by eliminating the need to import oil and refined products and an additional 25 billion rand to the government in the form of taxes and royalties.<\/p>\n\n\n\n \u201cAs such, catering Block 11B\/12B potential to the domestic market can result in not only meeting the country\u2019s energy needs but will also a significant boost to the economy,\u201d the report adds.<\/p>\n\n\n\n These are some of the reasons why I\u2019ve been calling for South Africa\u2019s government and South Africa\u2019s state-owned companies to get their acts together to fast-track this project.<\/p>\n\n\n\n But these aren\u2019t the only reasons why I feel getting this project moving is an urgent matter. To explain them, I\u2019ll have to backtrack a little.<\/p>\n\n\n\n Opportunity Costs<\/strong><\/p>\n\n\n\n Here\u2019s what I mean.<\/p>\n\n\n\n South Africa\u2019s energy crisis dates back at least to 2007, the point at which the national power provider Eskom was no longer able to turn out enough electricity to cover domestic demand.<\/p>\n\n\n\n Around the same time, the exploration and development of unconventional hydrocarbon reserves in the United States were gaining momentum, and shale oil and gas experts were looking around the world to see where else they might be able to make their next fortunes. One of the places that caught their collective eye was South Africa\u2019s Karoo basin, where working petroleum systems have been found as long ago as the late 1960s. The government handed out several technical cooperation permits in 2009 and 2010, and investors submitted their first applications for exploration rights in 2010.<\/p>\n\n\n\n And then in 2011, South Africa\u2019s government declared a moratorium on hydraulic fracturing (fracking). That declaration served to bring the exploration process to a complete halt, since it denied investors access to a key drilling technology used in unconventional hydrocarbon operations. As a result, no more applications were submitted, and no more permits were awarded. The Karoo basin was essentially taken off the table as an option for large-scale development, even though it contains 30-485 trillion cubic feet (849.6 billion-13.73 trillion cubic meters) of gas in technically recoverable resources, according to figures from PASA.<\/p>\n\n\n\n I\u2019m not mentioning this because I\u2019m trying to legislate the past or argue for the abolishment of the moratorium. The ban on fracking exists, and I don\u2019t think it\u2019s going anywhere any time soon \u2013 and frankly, it would probably be a complicated, difficult, and fraught affair to try eliminating it in an environmentally sensitive region such as the Karoo basin.<\/p>\n\n\n\n But I do believe there have been opportunity costs to keeping it in place. Specifically, because South Africa opted to keep developers out of the Karoo basin, it lost a potential opportunity to start exploiting domestic gas reserves and making gas available for local use before Eskom reached the point of such severe crisis.<\/p>\n\n\n\n Keeping the Door Open<\/strong><\/p>\n\n\n\n So what I am saying is this: I don\u2019t want to see South Africa do this again. I don\u2019t want to see South Africa forego developing Brulpadda and Luiperd after taking the Karoo basin out of consideration.<\/p>\n\n\n\n Of course, the two cases aren\u2019t exactly the same. The Block 11B\/12B project isn\u2019t being held up by a government moratorium on a drilling technology that\u2019s disliked by environmental activists; instead, there seem to be more prosaic problems at work, such as foot-dragging by state-owned South African firms on matters related to pricing and financing.<\/p>\n\n\n\n However, these talks aren\u2019t just about Brulpadda and Luiperd. They\u2019re also about laying a foundation for future negotiations on the other prospects at Block 11B\/12B \u2013 Platanna, Woudboom, and Blaasop in the Padavissie Fairway, along with two additional prospects in the Kloofpadda Fairway, should those prove to contain additional gas reserves. They\u2019re about other future exploration projects in the Outeniqua basin \u2014 and perhaps in the Orange, Coastal, Bredasdorp, Algoas, or other basins as well.<\/p>\n\n\n\n I\u2019d like to think that South Africa is ready to leave the door open for these future projects \u2014 that it won\u2019t let these potential opportunities slip away while conditions in the power sector grow worse and worse.<\/p>\n\n\n\n But sometimes, keeping the door open requires effort \u2014 and action. I think now is the time for South Africa to act and to make sure that it keeps its offshore gas resources open for investment in a way that the Karoo basin hasn\u2019t been.<\/p>\n","protected":false},"excerpt":{"rendered":"