South Africa to bolster its oil and gas sector in 2019

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By Gerard Peter, Freelance Writer

Several initiatives have been put in place to galvanize South Africa’s oil and gas industry, as the government aims to attract investment and provide an enabling environment for the sector to grow.

The country is committed to amending its oil and gas regulation, and government last year confirmed that it would introduce new oil and gas laws after the 2019 elections.
In 2013, the country made a commitment to separate the oil and gas industry from the Mineral and Petroleum Resources Act, and provide the sector with separate legislation.

This, government hopes, will ease the licensing application process and lift the moratorium that is currently in place, which restricts the granting of applications for technical cooperation permits, exploration rights and production rights.

“An economy of our size cannot continue to operate without significant investment in oil and gas,” South Africa’s Energy Minister Jeff Radebe said. He made the comment while addressing Parliament in October last year.

The minister added that taking into account the current reality of unproven reserves in South Africa. The country needs to invest in blocks producing crude oil, particularly on the African continent.

It is a strategy that has been fast-tracked since the appointment of President Cyril Ramaphosa in February 2018. Already, the government has made significant inroads in engaging with key oil-producing countries in Africa.

A South African delegation that includes the Central Energy Fund and PetroSA, is currently visiting South Sudan. South Africa signed an outline agreement that could see the country invest around $1 billion in South Sudan’s oil industry at the South Sudan Oil & Power 2018 event in November. The investment will go into building a refinery and pipelines as well as exploration and training of workers and engineers.

Speaking at the event, minister Radebe said that the investment would ensure that South Sudan has the capacity to [produce 60,000 barrels per day. The investment is a major boost in a country where the oil industry funds about 98 percent of its budget. However, not only does this benefit South Sudan, but the investment also allows South Africa access to more crude oil resources in Africa.

Meaningful Engagement

In June last year, minister Radebe announced that he had initiated bilateral discussions with Mozambique regarding the further development of the cross-border gas infrastructure linking South Africa’s energy and chemical sectors to Mozambique’s vast natural gas resources. More than 100-trillion cubic feet of natural gas has been discovered in Mozambique and there is a possibility that further exploration and development will increase this amount.

The two countries already share an important partnership through the Rompco pipeline – a joint venture between Sasol, Companhia Mocambiçana de Gasoduto and the South African Gas Development Company. The 865km pipeline carries gas produced at the Pande and Temane fields, in southern Mozambique, to South Africa, where Sasol uses most of the gas to produce fuel, electricity and chemicals. The minister hopes that the talks will result in South Africa exploiting resources in northern Mozambique, where there have been large discoveries of gas in the Rovuma basin.

While minister Radebe hopes to strengthen ties between South Africa and Mozambique, he is also keen to unlock potential oil resources in other parts of the continent. Already, he has held discussions with his Namibian counterpart on ways to exploit that country’s Kudu gas reserves. He also held meaningful talks with Nigeria and Equatorial Guinea in the past few months.
No doubt, South Africa’s legwork to access more crude oil resources in Africa will bear fruit in the long-term.

And it is not just the Department of Energy that is actively engaging with African oil suppliers. In July 2018, President Ramaphosa urged his Nigerian counterpart President Muhammadu Buhari to sign Africa’s free trade agreement.

According to President Ramaphosa, the agreement, which will allow the free movement of goods and increase African intra-trade, represents a new dawn for the continent. However, Nigeria is yet to buy into the idea and has embarked on countrywide consultations.

Nigeria is a key supplier to South Africa, accounting for 33 percent of all the country’s fuel imports. President Ramaphosa has already met with Nigeria’s Buhari to discuss the free trade agreement. Should Nigeria agree, it could be of great benefit to both countries as South Africa looks to increase its importation of petroleum products from Nigeria.

Prioritising Exploration

In the meantime, however, South Africa must look into exploration in Africa. Ramaphosa admits that exploration is quite costly but that it is a necessary exercise. In addition, the groundwork that was done in 2018 to forge new and strengthen existing relationships with African oil suppliers needs to gain real traction this year.

South Africa is a member of the African Petroleum Producers Organisation (APPO).