Regional Integration, Policy Certainty Needed
Southern Africa is on the brink of greatness in its oil and gas sector, with Mozambique and Tanzania eager to develop massive gas discoveries despite the economic challenges; and South Africa debating the exploitation of its shale gas reserves. Challenges for the region include building a viable and stable regulatory framework, creating masterplans for development and regional cooperation.
A diverse panel of industry experts tackled many of these issues in-depth during the Southern Africa Market Spotlight at Africa Oil & Power 2017 in Cape Town in June. A major theme for the panel was the importance of regulatory certainty and cross-border cooperation.
“We have had big discoveries in East Africa, in Mozambique and Tanzania, and we’ve got proven reserves all over the west of Africa, on shore as well as offshore. And South Africa is clearly lagging in this, with unexplored frontier. We have lots of acreage, which people believe shows some promise, but we haven’t actually got significant quantities out of the ground yet. We are clearly at different stages in our development here, so there could potentially be a degree of energy interdependence between ourselves and our neighbors, especially in Mozambique,” said Niall Kramer, CEO of the South African Oil & Gas Alliance, as he opened the panel.
The panel emphasized the need to build up oil and gas exploration in South Africa, as well as the need for additional infrastructure, such as gas pipelines and LNG terminals.
Herman Neethling, General Manager of Shell Integrated Gas Venture, emphasized the need for countries with a gas supply, such as South Africa, to develop their gas resources, especially with the emerging role of gas in power generation.
“When you look at it from potential supply of gas, there is the opportunity to import gas … But then I think the real prize is really exploring, and if you actually have indigenous resources, to develop that to its full potential for the country. Because that brings in the affordability piece, which is key also in terms of that energy transition,” said Neethling.
To develop gas and also for imports, Southern Africa need to create regulatory certainty, Paul Eardley-Taylor, Head of Oil & Gas Southern Africa at Standard Bank, said.
“Certainly, in the energy case, having the IRP mechanism and the IEP mechanisms finalized as soon as possible such that procurement can then go forward,” said Eardley-Taylor.
Nazario Bangalane, Senior Petroleum Engineer INP, spoke from the recent experiences in Mozambique and the importance of not just creating a regulatory framework, but also having a gas master plan for development, which Mozambique developed after the discoveries in the Rovuma Basin. The country also updated its regulatory framework.
“To make sure that the projects in the Rovuma Basin, both the company and the government, they get benefits on that. … To make sure that those projects will be developd in a good manner, and be beneficial for both parties,” he said.
Kishan Pillay, Director of Up-and Midstream Oil & Gas dti in South Africa, said that gas is always the least cost-scenario in modeling the impact of regional LNG development on pricing.
“This necessitates the need for the government to move quickly, to try to lock in these lower gas prices now. But looking at the region as a whole, I also think that we should not just focus on the molecules, but also the supply chains and the value chains that actually extract these resources, and this is now talking about local content and trying to create some indigenous industries off the back of the resources,” he said.
In this context of rapid growth and development, cross-border cooperation will be vitally important for the region.
“It is challenging, I know, to do cross-border agreements, but that is really where the whole region can benefit. I don’t think it is easy. I think it will take courage and time. I do think that in many parts there is a willingness, so I am hopeful,” said Peter Manoogian, Senior Vice President of Sasol E&P International.
South African Oil &
Director, Up-and Midstream
Oil & Gas
dti, South Africa
Senior Petroleum Engineer
Head of Oil & Gas
Shell Integrated Gas
Senior Vice President
Sasol E&P International
A video recap of the panel will be available in the coming weeks.