S oil and gas Confidence
S oil and gas Confidence grows in oil and gas sector A five-year plan put in place by Petroleum Agency South Africa (PASA) to ensure that the state agency mandated to evaluate, promote and regulate oil and gas exploration and production activities in South Africa is paying off. Shutterstock TTimeframes in the oil and gas sector tend to be longer rather than shorter. Exploration efforts can take years to produce results and the processes that follow are also measured in years rather than months: environmental assessments, fundraising and sourcing offtake agreements. When the processes are adhered and when all the regulations have been followed, the rewards can be considerable. Whereas it took nine years to find the R1.2-billion needed to fund the first phase of the Virginia Gas Project in the Free State, investors are now looking keenly at its prospects. A total R3.6-billion has been invested by Ivanhoe Mines to secure some offtake rights and the Central Energy Fund has purchased a 10% stake in Tetra4 for R1-billion. This type of development and inward investment is promoted and encouraged by Petroleum Agency SA (PASA). The process started in 2007 when exploration rights to the Virginia area were granted to a company which later became Tetra4, a wholly-owned subsidiary of Renergen. Various other rights, licences and reports were granted and made on the project and a full Environmental Impact Assessment was completed in 2017. In 2022, the company achieved several milestones and in September of that year, commercial operations of the company’s LNG plant began. In January 2023, the announcement was made that helium production had begun – a first for South Africa. The Tetra4 Virginia Gas Project is the only holder of an onshore petroleum production licence issued by the Department of Mineral Resources and Energy (DMRE) through PASA. The production right area covers 187 000 hectares around the towns of Welkom, Virginia and Theunissen. WORLD-CLASS DISCOVERIES The large offshore Brulpadda and Luiperd discoveries made by TotalEnergies and their partners in the last few years have opened up a world-class hydrocarbon play in the deep ocean off South Africa’s south coast. These discoveries are extremely encouraging and all evidence suggests far more potential in the area. The fact that the project leaders have applied to convert their exploration right into a production right confirms the value of the prospect. PASA’s stated goal is to move beyond exploration to development and production, and so TotalEnergies’ application is welcome. In addition, the recent successes offshore Namibia are extremely significant and encouraging for South Africa as the same geological sedimentary basin continues into South African territory, extending from the border with Namibia to offshore Cape Town, and far out to sea, comprising an area of over 160 000 square kilometres. Shell holds exploration acreage in the South African southern sector of the basin together with partners TotalEnergies and PetroSA. TotalEnergies holds further acreage in the South Africa sector of the Orange Basin with partners Sezigyn in ER343 and Impact Africa in ER335. To the east and north-east of these blocks is ER339 where Eco Atlantic holds an interest. Further investment in oil and gas exploration both on and offshore could lead to increased energy security. The progression from discoveries at Brulpadda and Luiperd to production of these hydrocarbons will boost investor confidence enormously. In addition, Minister Mantashe has made it clear that South Africa’s indigenous oil and gas resources have a role to play in South Africa’s future energy mix. More recently, President Ramaphosa has paved the way for independent power production which could give a major boost to investment in developing gas discoveries for electricity generation. Bringing the Brulpadda and Luiperd discoveries to production will secure thousands of jobs in the Mossel Bay area directly involved in midstream and downstream, while the surrounding region’s economy will benefit. Further investment in oil and gas exploration both on and offshore could lead to increased energy security or even energy independence for the country, with obvious consequences for economic growth. 22 | Service magazine
THE ENVIRONMENT AND INVESTORS As custodian, PASA ensures that companies applying for gas rights are vetted to make sure they are financially qualified, technically capable and have 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. Applicants must demonstrate that they have the technical capability and financial resources to carry out the work programmes agreed, as well as any future development that may ensue. A track record of experience, a good health and safety record, environmental compliance record and compliance with oilfield practice is essential. At the same time, PASA is determined to increase involvement of local companies in the upstream industry and to develop local capacity. One way of achieving this is through partnerships between international and local companies. A major issue affecting existing investors is the current public negativity towards any activity related to oil and gas exploration. Together with the DMRE, PASA is doing its utmost to educate and inform the public of the many potential benefits that exploitation of indigenous oil and gas resources could bring. There is currently a major series of public consultation and engagement initiatives underway to achieve this. PASA strongly believes that the development of indigenous hydrocarbons, and especially gas, have a role to play in building South Africa’s economy and to facilitate a just transition to new energy sources. The enactment of the Upstream Petroleum Resources Development (UPRD) Bill will put PASA in a strong position to attract further investment in the upstream sector and we are preparing for this by constantly evaluating prospectivity and preparing for future licensing rounds and new data acquisition. S oil and gas PASA’S FIVE-YEAR STRATEGY PASA’s strategy is built around five pillars to ensure delivery on the agency’s mandate. These are: • Increasing exploration activity. Initiatives that help us to attract and retain exploration companies. • Sustainability. To ensure that the company has sufficient financial and human resources to carry out its responsibilities. • Advocacy. To improve our influence and ensure that our contribution is understood and recognised. • Digital transformation. To seamlessly adopt new technologies, automation and integration of systems. • Operational excellence. To ensure efficiency of processes. S PASA: EXPLORATION AND PRODUCTION Petroleum Agency SA evaluates, promotes and regulates 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. 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 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 African-owned entities in the upstream industry. Currently, natural gas supplies just 3% of South Africa’s primary energy. A significant challenge facing the development of a 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). Renergen Service magazine | 23
