South Africa has no plans to curb its oil and gas operations in favour of a green transition just yet, as the government announces big plans to boost oil and gas exploration activities in the coming years. This is part of its aim to improve its energy security and reduce the country’s reliance on foreign imports. As such, the government recently approved new drilling activities by France’s TotalEnergies, aiming to make significant new discoveries to support longer-term oil and gas production.
This month, the Deputy Minister of Mineral Resources and Energy, Nobuhle Nkabane, stated that South Africa will “sustainably continue to develop” its oil and gas resources, at the Southern African Oil Gas Conference. Nkabane explained, “It is imperative to accelerate the exploration of oil and gas both onshore and offshore, as having our own petroleum resources will reduce our dependency on foreign oil and cushion our economies, in particular our citizens against imposed whirlwinds of crude price volatility.”
Natural gas contributes around 3 percent of South Africa’s energy supply and is seen as key to ensuring its energy security, as well as supporting the country’s decarbonisation aims. A recent discovery of gas reserves in Mpumalanga reflects the country’s openness to greater exploration activities. In August, the Ministry of Mineral Resources and Energy announced the discovery of 3.1 billion cubic feet of natural gas by Australian company Kinetiko Energy. It stated, “It will assist with baseload energy required to strengthen South Africa’s energy security and propel the quest for industrialisation that will bring about growth and development.”
While the aim of increasing South Africa’s natural gas output may seem at odds with a green transition, it could help the country to reduce its reliance on highly polluting coal. South Africa continues to depend on coal for around 80 percent of its power generation. In a country that regularly faces rolling blackouts, the government has stated its need to continue using coal until a reliable alternative is established. This includes the development of the country’s oil and gas resources.
Nkabane also highlighted the importance of developing South Africa’s energy security before it considers exporting its gas resources. She explained, “We have also seen that Europe is looking to Africa to diversify its gas supplies. This presents a good opportunity and market for local gas beyond our own use. However, the caveat is that we should not rush to export gas to Europe at the expense of our own domestic and regional markets, no matter how tempting the prospects of earning foreign revenue.”
South Africa’s revised Upstream Petroleum Development Bill is expected to make it easier for oil and gas companies to gain approval for new projects. This means that the upstream sector is no longer managed by the 2002 Mineral and Petroleum Resources Development Act. In the past, lawyers have found loopholes in the legal documentation to make the approval of new exploration operations almost impossible, something that is expected to change owing to this new legislation.
This month, South Africa dismissed an appeal against TotalEnergies’ offshore drilling plans, instead approving its planned oil and gas exploration in a block off the southwest coast. The French company hopes to carry out exploration activities in Block 5/6/7 and with the approval plans to drill up to give offshore wells. Despite gaining initial project approval from the Ministry of Mineral Resources and Energy in April, environmentalist groups and activists appealed the decision due to environmental concerns. However, the Minister of the Environment, Barbara Creecy, stated in the ruling, “I am therefore satisfied that the impacts of noise and light have been adequately assessed and mitigated to ensure low impacts on the receiving environment. As such this ground of appeal is dismissed.”
TotalEnergies previously discovered two huge gas fields off the South African coast in 2019 and 2020. Its current area of interest covers 10,000km2 and is located between Cape Town and Cape Agulhas, in water depths between 700 metres and 3,200 metres. It operates activities in the block and holds a 40 percent stake, with Shell holding another 40 percent and the national oil company PetroSA holding the remaining 20 percent.
As of June, South Africa had 15 oil and gas projects in the pipeline between 2023 and 2027. These projects are expected to help develop the country’s estimated 27 billion barrels of crude oil and 60 trillion cubic feet of gas reserves to boost its energy security and help reduce its reliance on coal. The projects span from new exploration activities to floating storage and processing plants.
Following years of dependence on coal, the government of South Africa has created a strategy to develop the country’s oil and gas resources to boost its energy security and decarbonise its energy sector. This depends significantly on the approval of new exploration activities aimed at increasing the number of offshore oil and gas operations, which is expected to reduce South Africa’s reliance on energy imports.
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By Felicity Bradstock for Oilprice.com
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