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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and…

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South Africa: The Next Hot Spot For Offshore Oil Exploration

Offshore Drilling

South Africa’s land is known for its resources such as platinum, gold, diamonds, copper and coal. But its waters may be hiding future giant oil and gas discoveries potentially capable of changing the country’s power generation mix by reducing its use of coal.

Dr. Anongporn Intawong, Team Leader Geoscientist at seismic surveys provider Spectrum, believes there could be a giant future discovery off South Africa’s coast. Intawong delivered a presentation ‘Future giant discovery in the Outeniqua Basin, offshore South Africa’ at Finding Petroleum’s event Finding East & Southern African Oil & Gas in London last week.

What we are seeing is that [there] might be a future giant discovery in this basin,” Intawong said at the event, reports Rigzone, whose assistant European editor Andreas Exarheas tweeted a photo from the presentation.

Spectrum’s Intawong did not quantify the size of possible future discoveries, but reminded the audience that previous discoveries in Outeniqua Basin have yielded recoverable reserves of up to 314 million barrels of oil equivalent.

The potential giant discoveries could help South Africa boost its gas-to-power program to reduce reliance on coal-fired power generation.

Although many companies, including majors ExxonMobil and Total SA, have acquired rights to explore offshore South Africa, uncertainties over pending legislation remain. These uncertainties are a major deterrent to active exploration drilling, which is already struggling from the oil price crash and the difficult conditions for drilling in the area. Related: Geopolitical Time Bomb: Chaos In Somaliland Could Trigger Regional Conflict

According to Spectrum’s Intawong at last week’s event – Rigzone reports - South Africa’s new laws on regulating the petroleum industry are expected to be passed in the middle of this year.

South Africa has been planning to separate the oil and gas regulations from the current Mineral and Petroleum Resources Development Act, with an upstream gas bill that would govern exploration and gas concessions, and a gas amendment bill that would regulate the midstream part of the gas value chain.

The bill is still being debated at various legislation levels, and international companies are probably waiting to see a final adopted law before committing more investments into exploration.

There’s a lot of prospective offshore acreage in South Africa,” Alasdair Reid, research analyst, S&E Africa Research, Upstream Oil & Gas, at Wood Mackenzie, told Offshore Engineer at the end of last year. “Most of the big players are in there. But, until the regulatory environment is resolved, we’re not going to see much exploration activity,” Reid noted.

But in the longer term, South Africa’s offshore would be interesting, he said, adding that the country has a strong supply base because it often serves as a rigs base.

Until exploration activity picks up, South Africa is investing in LNG infrastructure at ports to produce electricity and help reduce coal dependence. Related: Panic In Vienna: OPEC Needs To Bring Down Costs To Compete With U.S. Shale

According to the U.S. Energy Information Administration, more than 85 percent of South Africa’s installed electric generating capacity is powered by coal. Despite the fact that South Africa’s government seeks to diversify the power-generation mix with more renewables, chronic power shortages, coupled with the economic advantage of coal-fired generation, suggest that coal will continue growing as a primary source of energy supply, the EIA reckons.

Apart from potential giant offshore discoveries, South Africa has shale gas resources. EIA has estimated that the country holds 390 trillion cubic feet (Tcf) of technically recoverable shale gas resources, located in the Karoo basin in the Whitehill (211 Tcf), Prince Albert (96 Tcf), and Collingham (82 Tcf) formations.

But South Africa has yet to award licenses for shale gas exploration, and considering how controversial shale exploration usually is, the potential giant offshore discoveries could be a more certain bet for international companies once the legislation picture becomes clear.

By Tsvetana Paraskova for Oilprice.com

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