DEVELOPING OIL, GAS INDUSTRY A PRIORITY
SOUTH Africa’s demand for petroleum products is predicted to increase significantly by 2050. The use of natural gas as a cleaner source of natural energy is also expected to grow.
Logistically, the country stands to benefit from the discovery of substantial offshore gas reserves off Mozambique, where industry heavyweights Eni, Exxonmobil and Anadarko are involved in projects to construct processing facilities to exploit these reserves.
If current interest and sentiment are anything to go by, South Africa will soon follow suit in establishing such offshore oil and gas infrastructure.
Developing South Africa’s oil and gas industry remains one of the key initiatives of the government’s “Operation Phakisa” policy, which aims to grow the ocean economy across sectors.
A number of recent industry developments highlight what appears to be renewed confidence in the oil and gas sector by local and overseas investors.
Laying out the necessary processing infrastructure is capital-intensive, and some commentators have remarked that this renewed interest may be due to the perception of a more “investor-friendly” political regime under President Cyril Ramaphosa.
Recent noteworthy developments include:
Eni’s final scoping report for exploration drilling within Block ER236, off the east coast was submitted to the Petroleum Agency of SA (Pasa) for consideration in March.
The purpose of the drilling is to assess the commercial viability of exploiting the area’s gas reserves and, unsurprisingly, the move is regarded as controversial by much of the public and environmental conservationists.
Before the project can go ahead, environmental authorisation must be granted by the National Department of Mineral Resources, via Pasa.
In March it was reported that French energy giant Total sought to resume operations later this year on South Africa’s first deep-sea exploration well in the Outeniqua basin about 175km off the coastline. It was also reported that Total was looking to acquire a number of offshore vessels to assist with its operations at this well.
On April 18, it was reported that Grindrod’s subsidiary Unicorn Bunker Services was sold to two local black economic empowerment entities – Women in Oil and Energy South Africa and 100% black-owned and managed shipbroking firm Linsen Nambi.
The amount involved was not disclosed, but the deal was financed through the Industrial Development Corporation. The company is an established bunker (marine fuel) delivery service which owns three modern tankers and serves blue chip clients such as Chevron, Engen and BP.
On April 23 it was announced that a private port terminal operator, Saldeco, had been selected by Transnet to build and operate South Africa’s first offshore supply base in Saldanha, the Western Cape. It’s estimated the base will attract investment of R1.8 billion to the town and offer employment opportunities.
The base is meant to provide support services to offshore oil and gas companies operating in and around southern Africa. It will operate as a repair and fabrication facility, as well as a refreshment station, providing bunkers and fresh water to the vessels.
These developments are positive signs of what could become a thriving local offshore industry in future years. This is of course significant to local players. As of a few years ago, 200 companies had registered with the South African Oil and Gas Alliance, which provides support services to the offshore industry via South African ports.
Renewed economic activity in the sector will also be tempered by regulatory developments, such as the pending Mineral and Petroleum Resources Development Amendment Bill and the Merchant Shipping Bill.
Notably, the Merchant Shipping Bill (now in the public consultative phase) contemplates cabotage for merchant shipping vessels, meaning that vessels which ply a coastal trade in South Africa are required to be registered under the South African flag.
This concept could be extended to offshore supply vessels and other vessels operating in South African waters, such as bunker barges.
It is important that industry players keep up to date on these developments and participate in the consultative process where possible.
Nel is a senior associate at Bowmans Durban.