Can South Africa become an oil giant?

South Africa is currently forced its look overseas to satisfy most of its oil requirements and its reliance on Iranian oil has resulted in repeated difficulties over the past few years. The government of South Africa is therefore keen to encourage oil and gas exploration, although exploration efforts in the country have been rather intermittent over many years.

Now, however, the government is hopeful that its new investment regime will pay dividends. The country has a small oil and gas production industry, with proven oil reserves of 15m barrels, but its synthetic fuels industry is far more significant. Gas-to-liquids and coal-to-liquids plants produce 160,000 b/d. However, the identification of even small new reserves could enable commercial development given onshore demand from the power sector and industrial consumers.

The country’s deepwater maritime territory has been relatively little explored, partly because the necessary technology was simply not available until about 15 years ago but also because upstream operators must deal with very strong currents that are absent in the world’s main deepwater production areas, such as the Gulf of Guinea, which stretches from Angola north and westwards.

“South Africa is receiving much attention, mostly because of the potential of shale gas in the Karoo, but also because it has a long and largely unexplored coastline, off which many believe large hydrocarbon fields may exist”

However, the discovery of large gas fields offshore Tanzania and Mozambique has encouraged a reassessment of the hydrocarbon potential of other areas offshore the African continent. Most of the South African deepwater blocks on offer have been licensed relatively recently but it will be some time before drilling begins on most blocks.

Pretoria will have its fingers crossed that commercial discoveries are made to enable the country to wind down its imports and begin to generate some export income. In July, Total and Canadian Natural Resources (CNR) began drilling in deepwater acreage in the Outeniqua Basin, near Mossel Bay in the Western Cape. The French firm bought a 50% stake in Blocks 11B and 12B from CNR last year.

Total describes South African deep offshore as “one of the few remaining under-explored offshore regions in Africa”. Marc Blaizot, Total’s senior vice-president for exploration said: “The results of the upcoming exploration well will be decisive, especially in terms of operability of the area in such a harsh environment.”