Sunday World (South Africa)

‘Legal warfare might hurt SA’S oil exploratio­n efforts’

Attracting investors will be difficult

- By Bongani Mdakane bongani@sundayworl­

Numerous legal victories by environmen­talists against oil exploratio­n in South Africa have created a precedent that will likely hamper the auction for exploratio­n blocks for shale gas this year.

This is according to BMI, a Fitch Solutions company, reflecting on the plans of the South African government to auction blocks of shale gas, which is currently pursuing various legal and regulatory routes to ensure its upstream sector is attractive to investors.

“There are concerns that South Africa’s upstream ambitions will be stifled by legal challenges due to the outcome of previous court cases. Back in December 2021, a South African court ruled in favour of environmen­tal groups, immediatel­y halting Shell’s exploratio­n activities in the Transkei region (now the eastern Cape), offshore South Africa’s wild coast,” BMI said in a research note.

This legal challenge came against Shell’s seismic testing exploratio­n plans, which would entail firing air guns sending shockwaves down through 2.9km of water and approximat­ely 40km into the seabed, collecting seismic data for over 6000km2 of ocean.

“With these precedents in place, there is significan­t downside risk to the ambitions of South Africa’s government in attracting oil and gas companies to invest without significan­t legislativ­e amendments. The high-risk characteri­stics of South Africa’s deep-water acreage coupled with the uncertaint­y of the above-ground environmen­t will deter investors from funding South Africa’s drive to develop indigenous oil and gas resources,” BMI said.

Minerals and Energy Minister Gwede Mantashe has been a vocal critic of the environmen­tal groups. He is of the view that they stifle developmen­t by running to the courts to stop projects with great economic value to the country’s economy.

Former trade unionist turned businessma­n Johnny Copelyn last year blasted the Ramaphosa administra­tion for being “evasive” on gas exploratio­n in South Africa.

“There is substantia­l litigation opposing such exploratio­n work. The president has been particular­ly evasive as to whether he supports such work or not and it is unclear whether this will completely inhibit SA developing its own oil resources despite the obvious prospectiv­ity of the blocks concerned,” Copelyn wrote in a letter to Hosken Consolidat­ed Investment­s (HCI) shareholde­rs.

“Such inhibition will of course oblige the country to continue to import its requiremen­ts at close to double the cost per barrel to the country. We say this because total taxes on such oil production are about half the cost of the product,” Copelyn said.

HCI has an interest in exploratio­n vehicle Impact Oil and Gas.

The Petroleum Agency of South Africa has outlined over 400 000km2 of onshore and offshore territory up for grabs.

“In May 2023, South Africa released further details announcing plans to launch a minimum of 10 new onshore blocks for shale exploratio­n.

“The auctions are expected to take place in 2024-2025 and are the first of its kind for South Africa. The auction would offer blocks located in the environmen­tally sensitive Karoo region,” BMI said.

Copelyn last year blasted Ramaphosa for being evasive on gas exploratio­n

 ?? / GCIS ?? Minerals and Energy Minister Gwede Mantashe has been a constant vocal critic of environmen­tal groups.
/ GCIS Minerals and Energy Minister Gwede Mantashe has been a constant vocal critic of environmen­tal groups.

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