Could Massive Gas Find Help Boost South Africa’s Economy?
By Haley Zaremba
Mar 23, 2019, 5:00 PM CDT
Total Exploration and Production Southern Africa recently made a massive offshore gas discovery off the coast of Mossel Bay. First reports of the newly discovered Brulpadda well speculate that the field holds anywhere from 500 million to more than 1 billion barrels of oil equivalent. While on the surface this would seem to be objectively good news for South Africa at a time when the country’s leadership is looking for ways to diversify the nation’s energy mix, the history of Africa’s long-suffering energy sector indicates that the future of South African energy remains uncertain, to say the least.
Total’s finding, while considerable, is not enough to take over South Africa’s currently coal-dominated energy mix on its own, but its timing is certainly fortuitous--for Total, at least--in a particularly weak moment in terms of the country’s energy policy and energy security. The nation’s Integrated Resource Plan (IRP), which oversees energy policy over the years of 2010 through 2030, has only been reviewed once since it was put into place in 2011. There is a new draft of the IRP from 2018 that accounts for an additional 8,100 MW of gas-to-power capacity integrated into South Africa’s energy industry by 2030, but this much-needed updated draft is still caught up in bureaucracy, waiting for approval.
If South Africa hopes to boost its economy and become an African energy industry frontrunner without seeing major exploitation of and damage to its environment, experts argue, it is paramount that the government needs to solidify its gas regulatory policy in a hurry. This is no small task, however, as at present South African energy policy is, in many ways, in a state of flux. Just months before Total’s major offshore gas discovery, South African Minister of Mineral Resources Gwede Mantashe had put a moratorium on all applications for oil and gas exploration to give his office the opportunity to update its process for licensing. One notable consequence of this decision was the relinquishing of a license to search for oil off South Africa by supermajor Royal Dutch Shell, thanks to what they saw as legislative uncertainty.
Whether the country is legislatively ready for a major influx of resources and investment or not, Total’s discovery is already being lauded as a saving grace for the nation’s economy. President Cyril Ramaphosa’s investment-focused state of the nation address leaned heavily on this promise, saying that “this could well be a game-changer for our country and will have significant consequences for our country’s energy security and the development of this industry.” Ramaphosa acknowledges, however, that his administration has some work to do before that can become a reality. In a statement just hours after Total’s announcement of their discovery on February 7, the South African president said that his cabinet will need to overhaul its energy sector legislation in order to properly regulate this significantly changing industry.
It’s understandable why Ramaphosa is so hopeful about Total’s discovery and South Africa’s energy future in general. According to the South African Oil & Gas Alliance, the Brulpadda well discovery could translate to as much as 1-trillion rand (over $73 billion) for the South African economy over the next 20 years. While some rejoice, however, there are also many who take this news with a large grain of salt.
Environmental groups such as Greenpeace see not just a potential for economic upturn, but for vast environmental mistreatment and destruction. Greenpeace Africa’s Chris Vlavianos has dismissed the initiative as reckless, saying that “deep-sea drilling is far too risky. The possibility for an oil spill always exists, and the environmental impacts of deep-sea drilling for oil and gas are too significant to be ignored, with very little benefit or job creation for South Africans.”
By Haley Zaremba for Oilprice.com
Mar 23, 2019, 5:00 PM CDT
Total Exploration and Production Southern Africa recently made a massive offshore gas discovery off the coast of Mossel Bay. First reports of the newly discovered Brulpadda well speculate that the field holds anywhere from 500 million to more than 1 billion barrels of oil equivalent. While on the surface this would seem to be objectively good news for South Africa at a time when the country’s leadership is looking for ways to diversify the nation’s energy mix, the history of Africa’s long-suffering energy sector indicates that the future of South African energy remains uncertain, to say the least.
Total’s finding, while considerable, is not enough to take over South Africa’s currently coal-dominated energy mix on its own, but its timing is certainly fortuitous--for Total, at least--in a particularly weak moment in terms of the country’s energy policy and energy security. The nation’s Integrated Resource Plan (IRP), which oversees energy policy over the years of 2010 through 2030, has only been reviewed once since it was put into place in 2011. There is a new draft of the IRP from 2018 that accounts for an additional 8,100 MW of gas-to-power capacity integrated into South Africa’s energy industry by 2030, but this much-needed updated draft is still caught up in bureaucracy, waiting for approval.
If South Africa hopes to boost its economy and become an African energy industry frontrunner without seeing major exploitation of and damage to its environment, experts argue, it is paramount that the government needs to solidify its gas regulatory policy in a hurry. This is no small task, however, as at present South African energy policy is, in many ways, in a state of flux. Just months before Total’s major offshore gas discovery, South African Minister of Mineral Resources Gwede Mantashe had put a moratorium on all applications for oil and gas exploration to give his office the opportunity to update its process for licensing. One notable consequence of this decision was the relinquishing of a license to search for oil off South Africa by supermajor Royal Dutch Shell, thanks to what they saw as legislative uncertainty.
Whether the country is legislatively ready for a major influx of resources and investment or not, Total’s discovery is already being lauded as a saving grace for the nation’s economy. President Cyril Ramaphosa’s investment-focused state of the nation address leaned heavily on this promise, saying that “this could well be a game-changer for our country and will have significant consequences for our country’s energy security and the development of this industry.” Ramaphosa acknowledges, however, that his administration has some work to do before that can become a reality. In a statement just hours after Total’s announcement of their discovery on February 7, the South African president said that his cabinet will need to overhaul its energy sector legislation in order to properly regulate this significantly changing industry.
It’s understandable why Ramaphosa is so hopeful about Total’s discovery and South Africa’s energy future in general. According to the South African Oil & Gas Alliance, the Brulpadda well discovery could translate to as much as 1-trillion rand (over $73 billion) for the South African economy over the next 20 years. While some rejoice, however, there are also many who take this news with a large grain of salt.
Environmental groups such as Greenpeace see not just a potential for economic upturn, but for vast environmental mistreatment and destruction. Greenpeace Africa’s Chris Vlavianos has dismissed the initiative as reckless, saying that “deep-sea drilling is far too risky. The possibility for an oil spill always exists, and the environmental impacts of deep-sea drilling for oil and gas are too significant to be ignored, with very little benefit or job creation for South Africans.”
By Haley Zaremba for Oilprice.com
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