S oil and gas
S oil and gas Encouraging and regulating exploration and production for the economic growth of South Africa South Africa is now one of eight countries that produces helium, 16 years after Petroleum Agency South Africa granted exploration rights. If anyone should doubt the significance to the national economy or the importance to the nation as a whole of the distribution of licences in the oil and gas sector, they should pause for a moment and consider the trajectory of a project currently underway in the northern part of the Free State province. T The triangle made up of the towns of Virginia, Welkom and Theunissen used to be rich in gold mines, but for many years yields declined and the area’s economy struggled with job losses rising steadily. A fortuitous discovery of some methane gas on a farm in Virginia in 1998 led to the creation of a company and to some entrepreneurs requesting licences to explore. Which is where Petroleum Agency South Africa comes in. PASA is responsible for evaluating, promoting and regulating oil and gas exploration and production activities in South Africa and archives all relevant geotechnical data. The Agency acts as an advisor to the government and carries out special projects at the request of the Minister of Mineral Resources and Energy. Currently, natural gas supplies just 3% of South Africa’s primary energy. A significant challenge facing the development of a South Africa is one of only eight countries in the world to become a helium producer. major gas market is the dominance of coal. Opportunities for gas lie in the realisation of South Africa’s National Development Plan (NDP) and the Integrated Resource Plan (IRP). In 2007, exploration rights to the Virginia area were granted to a company which later became Tetra4, a wholly-owned subsidiary of Renergen. In 2012 a full onshore petroleum production right was awarded and a full Environmental Impact Assessment was completed in 2017. As custodian, Petroleum Agency SA ensures that companies applying for gas rights are vetted to make sure they are financially qualified and technically capable, as well having a good environmental track record. Oil and gas exploration requires enormous capital outlay and can represent a risk to workers, communities and the environment. Applicants are therefore required to prove their capabilities and safety record and must carry insurance for environmental rehabilitation. The Tetra4 Virginia Gas Project is the only holder of an onshore petroleum production licence issued by the Department of Mineral Resources and Energy through PASA. In the years since the first rights were issued, the project leaders have rolled out various aspects of the project, particularly related to contracts with manufacturers and transport companies for the use of liquified natural gas (LNG). But helium production was also on line. In October 2022, the commercial operation of the LNG plant came on stream and in January 2023, helium started being produced. To put this into perspective, with the January announcement South Africa became one of only eight countries in the world to become a helium producer. There are now just 16 places on the planet where this valuable resource is produced. Renergen states that the economic (NPV) valuation for proved and probable reserves as of 2019 was R8.9-billion. Subsequent tests have suggested that the resource is even more plentiful than first thought. Helium is used in rocket launches and microchips and about 85 tons of it are used every day. The potential economic spinoffs for South Africa – and the effect that the availability of LNG could have on making the country’s transport industry less reliant on dirty fuels – will be enormous. And PASA has played a vital role in bringing this all about, by issuing licences in a responsible manner. TRANSITIONING TO GAS The transition to cleaner fuels and renewables is inevitable if the world is to reduce the negative impact of climate change. South Africa is a signatory to the Paris Agreement and has committed to a “Peak-Plateau-Decline” carbon emission trajectory. The government’s policy is to diversify the country’s energy mix which is currently coal-dominated to a lower-carbon future by introducing proportionately higher renewable-energy resources such as wind and solar into the energy mix as well as gas-to-power. Gas burns with less than half the CO2 emissions from coal and additionally has no SOx emissions. Gas is therefore a suitable transition fuel towards a lower-carbon economy for South Africa especially since gas-topower technologies are flexible and would therefore complement the intermittent renewable energy being added to the national grid. South Africa’s energy mix is changing to include more gas through importing liquefied natural gas (LNG), using shale gas if reserves prove commercial and developing 10 | Service magazine
oil and gas S infrastructure for the import of LNG. Petroleum Agency SA plays an important role in developing South Africa’s gas market by attracting qualified and competent companies to explore for gas. Another major focus is increasing the inclusion of historically disadvantaged South Africanowned entities in the upstream industry. The International Energy Association (IEA) has published a report, Africa Energy Outlook 2022, which tackles the supposed conflict between Africa’s developmental needs and the urgent imperative to move away from fossil fuels. Both can be achieved, according to the report. A key factor in allowing Africa to continue to industrialise will be an uptick in the discovery and use of gas. If all the gas so far discovered in and off Africa was used, the continent’s share of global emissions would rise by 0.5% to 3.5%. Petroleum Agency South Africa has welcomed the report. PASA has consistently argued that South Africa’s road to net zero emissions will be via gas. As PASA CEO, Dr Phindile Masangane, noted in the context of major discoveries of oil condensate off the southern coast, “Gas is an obvious bridge to a lower-carbon future in South Africa.” S VALUE STATEMENT Petroleum Agency SA aspires to be a world–class organisation, committed to: • Professional excellence • Integrity • Direct, open, consultative communication • Transparency • Respect • Teamwork • Active regard for our natural environment • Corporate social responsibility in an empowering, vibrant workplace where diversity is valued. The Virginia Gas Project started producing helium in January 2023, a significant milestone for South Africa, which becomes the world’s eighth helium producer. Renergen is operating with licences from Petroleum Agency South Africa. Credit: Renergen New uses for natural gas. As the holder of the only onshore petroleum production licence issued by the Department of Mineral Resources and Energy through PASA, Renergen, through its subsidiary Tetra4, is producing natural gas and helium from its Virginia Gas Project near Welkom in the Free State. Credit: Renergen Service magazine | 11
