PetroSA in deal with Russia
An agreement strongly repositioning PetroSA towards growth was this week signed between PetroSA and a Russian geological exploration company, Rosgeo and it is expected to bring oil and gas development of about $400m (R5.2bn) to South Africa. The projected extraction of up to four million cubic metres of gas daily from blocks 9 and 11a off the Cape South Coast will benefit the PetroSA Gas-To-Liquid refinery in Mossel Bay.
PetroSA, the Oil and Gas Corporation of South Africa, and Rosgeo, the geological exploration company of the Russian Federation, this week signed an agreement that will see about US$400 Million invested in oil and gas development.
The agreement was signed in the presence of ministers of energy at the ninth Annual Brics Summit currently under way in Xiamen, Peoples Republic of China.
The agreement involves the development in the exploration areas of blocks 9 and 11a off the South Coast of South Africa.
“Finds in block 9 and 11a would result in much-desired exploration activity of our onshore and offshore oil and gas potential. The country and PetroSA will benefit greatly from the find. From the perspective of PetroSA it will result in cheaper feed into the Mossel Bay refinery,” Nhlanhla Gumede, PetroSA’s Interim chair said.
Block 9 falls in the so-called Bredasdorp basin, where the FA gas field and PetroSA’s Oribi and Oryx oil fields are located. It is in this block that the controversial Ikwezi project, which led to major financial losses of more than R14bn in the last financial year for PetroSA, was executed.
Block 11a, on the other hand, is a considerably smaller exploration area south of the Tsitsikamma coast.
Much hope is centred on the agreement with Rosgeo as available gas reserves are dwindling. At the parliamentary portfolio committee’s oversight visit at PetroSA’s gasto-liquid (GTL) Refinery in Mossel Bay on Tuesday, 27 June to receive a report from the Central Energy Fund (CEF) on the turnaround strategy for PetroSA, parliamentarians were told that if new gas sources were not found, the alternative would be to import natural gas, or to convert the current plant into a refinery.
At this meeting it was said PetroSA was embarking on a turnaround strategy as there were less than three years left of the present gas reserves, necessitating a change in the current business model from a gas-to-liquid (GTL) refinery, to processing crude oil.
This process is, however, resulting in far greater expenses to the company in terms of input costs.
Earlier hopes of building an LNG (liquefied natural gas) landing facility near Vleesbaai were dashed due to sea conditions being deemed as too rough.
Within the framework of the agreement, Rosgeo is supposed to conduct a considerable volume of geological exploration work. In particular, it is planned to carry out more than 4 000 square km of 3D seismic operations and over 13 000km of gravity-magnetic exploration works, as well as the drilling of exploratory wells. The estimated volume of the investment is about US$400 million.
The project envisages extraction of up to 4 million cubic metres of gas daily. This will subsequently be delivered to PetroSA’s Gas-ToLiquids refinery in Mossel Bay.
Roman Panov, the CEO of Rosgeo, Luvo Makasi, the chairman of the Central Energy Fund, and Nhlanhla Gumede, PetroSA’s Interim Chairperson, signed the agreement.
Panov stressed that within the framework of the contract Rosgeo would use advanced technologies, including 3D exploratory works, and modern seismic and drilling vessels.
‘Finds in block 9 and 11a would result in much-desired exploration activity of our onshore and offshore oil and gas potential.’
Strategic search for oil
“The signed agreement is aimed at developing bilateral relations and will strengthen Rosgeo’s presence in the African market,” he said.
Makasi said the search for oil and gas resources in South Africa remained strategic for the country’s energy security and was extremely important to PetroSA’s continued and sustainable survival.
“South Africa’s oil and gas potential remains largely unexplored. This exploration effort presents a significant upside to both the country and PetroSA. The upside for PetroSA is the possible expansion of our depleting gas resources. Discovery of hydrocarbons on our shores has the potential to bring significant revenues to the country and prove the country’s oil and gas prospectivity,” he added.
The PetroSA interim board chair said the agreement represented a significant development towards building a new strategic thrust for the company. He added that the agreement was strongly repositioning PetroSA towards growth.
According to Daily Maverick (dailymaverick.co.za) the deal, several years in the making, recently sparked controversy when claims of political meddling emerged through court proceedings. The site states: “Daily Maverick previously reported on claims by two former PetroSA board members that their removal from the board was allegedly due to a tussle about this lucrative deal. William Steenkamp and Owen Tobias brought an urgent High Court application last week in a bid to challenge their removal.”
Central Energy Fund (CEF) chairman Luvo Makasi has since refuted these claims. Responding on Monday from China to questions about the matter, Makasi said the removal of the previous PetroSA board was not related to the Rosgeo matter, as he had stated in his responding affidavit. “More so, the matter which is alleged to be the reason thereof [the board removal] had never been brought by the previous board to our attention as the CEF board and thus no reference is made to it in any correspondence between the CEF board and the previous PetroSA board, thus it could not have been the reason for the disagreement,” Makasi is quoted to have said to Business Day.
According to an agreement signed with a Russian company for geological exploration, Mossel Bay’s PetroSA plant will benefit from the projected extraction of up to four million cubic metres of gas daily from blocks 9 and 11a off the Cape South Coast.
Block 9 falls in the so-called Bredasdorp basin, where the FA gas field and PetroSA’s Oribi and Oryx oil fields are located. Block 11a is a considerably smaller exploration area south of the Tsitsikamma coast.