Battling declining production, US energy super giant ExxonMobil Corp. (NYSE:XOM) is taking on South Africa—a rising offshore venue--where it will acquire a 75% stake in the Tugela South Exploration Right.
ExxonMobil is acquiring the Tugela concession from London-based Impact Oil & Gas Ltd, and will control operations in the area. The Tugela concession covers 2.8 million deep-water acres (6,500 feet) off the country’s east coast. Additional exploration rights tied to the concession cover some 16 million offshore acres.
ExxonMobil will also have the exclusive rights to study another deep-water area, the 12.4 million-acre Durban Basin for one year, with the possibility to extend.
It’s Exxon’s first foray into South Africa, where it will join the likes of Royal Dutch Shell Plc (NYSE:RDSA) and Anadarko Petroleum Corp. (NYSE:APC). Shell has some 24 million acres off the coast of western South Africa, and is currently collecting seismic data in the Orange Basin, with a drilling decision expected next year.
How attractive is South Africa? Well, for now it’s just a potentially untapped offshore venue, but it’s managed to lure significant interest.
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South Africa has proven reserves of around 15 million barrels, most of which is offshore in the Bredasdorp basin (south) and off the western coast near its border with Namibia. There isn’t much crude oil production to speak of, but South Africa produces around 180,000 barrels per day of non-conventional, synthetic liquids.
The country also has an estimated 485 trillion cubic feet of technically recoverable shale gas, primarily in the Karoo Basin, while conventional natural gas reserves are limited and declining.
In terms of refining, South Africa’s capacity is impressive, handling about 703,000 bbl/d—rivaled in Africa only by Egypt. A new refinery is also underway to handle heavy crudes.
The most attractive thing about South Africa is that it’s been under-explored—at least offshore—and under-developed in terms of onshore shale in the Karoo Basin, which most eyes are now hungrily watching. But it will take time, patience—and lots of money.
By Charles Kennedy for Oilprice.com