Can South Africa become an oil giant?

Total is also keen to explore another block offshore South Africa but has interestingly sold its coal assets in the country to Exxaro Resources. The chief executive of Total South Africa, Christian des Closieres, said: “We have chosen Africa to be at the forefront of our business development strategy. Our exploration strategy is now more aggressive.”

An amendment to national petroleum legislation is being introduced that will give the state, probably in the form of PetroSA, a 20% stake in all future oil and gas projects, although presumably the taxation regime will be changed to take some account of the change.

Shale oil in the Karoo?
While smaller, independent oil companies usually open up oil production in frontier areas, Total is of an altogether different scale, with Shell and ExxonMobil. Similarly, the oil majors hold licences to explore for shale gas in the Karoo, although development there has been held up by a moratorium on exploration.

However, Pretoria is currently finalising the new shale oil and gas exploration legislation that should kick start investment. The United States Energy Information Administration estimates South African shale gas reserves at a massive 390 trillion cubic feet, although there is a great deal of doubt over how much of this would be economically recoverable. Much more exploration will be required to determine the exact extent and structure of these reserves.

Steve Harley, the president of DHL Energy Sector, argues: “Across the globe, existing and previously significant oil reserves are being depleted and so the need and desire to explore new geographies and develop new technologies to reach and extract difficult oil and gas reserves becomes ever more apparent.

“These new technologies are being developed at a rapid rate, which is allowing previously challenging operations and inaccessible deposits to be economically extracted and produced.

“South Africa in particular 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. As a result of the region’s potential, there are several offshore drilling exploration expeditions currently being planned in South Africa by the major oil companies.”