Saoga upbeat about prospects for the gas industry in South Africa
The South African Oil & Gas Alliance (Saoga) believes there are catalytic opportunities for developing the gas industry in South Africa, which have been buoyed by a renewed focus on attracting investment to the country.
The two major opportunities will be the massive gas finds in neighbouring Mozambique and the potential of gas exploration in South Africa, both offshore and in shale gas, says Saoga CEO Niall Kramer.
He is hoping next week’s Investment Summit, spearheaded by President Cyril Ramaphosa, will open up more opportunities for gas exploration.
“We may have a window to unlock the President’s investment funds towards research and exploration. We are sitting on the cusp of a big opportunity and explorers are starting to look at South Africa,” Kramer told the Sub Saharan Africa Power 2018 conference, in Cape Town.
He said he was encouraged by the leadership changes in South Africa, as well as the draft Integrated Resource Plan, in which gas had a prominent place.
“We now have a President much more attuned to these matters.”
Kramer said the “constipated” policy environment had been a problem in the past. Policy harmonisation was crucial.
“Big investors in liquefied natural gas (LNG) and exploration will need policy certainty. They want to know the legal and commercial terms are attractive and what they signed up to will prevail. We are now on the cusp of that going in the right direction.”
Saoga said exploration offshore South Africa's coast was previously limited, primarily by the depth of the potential resources and, secondly, by the ocean currents. Recent improvements in exploration technology, coupled with the need for South Africa to diversify its energy mix, had resulted in increased interest in exploration activity off South Africa's coast, with 20 exploration licences issued.
“We have to get on with the exploration for indigenous gas. But we need to realise that global exploration companies of scale have options. We are not the only sweets in the shop. They will typically work on a three-year investment cycle with those that offer the most attractive fiscal terms, policy and the most promising geology.”
Kramer said South Africa was unexplored and a high-risk environment.
“Between 10% and 30% of exploration activities are successful in the world. We need companies who know how to do it, have done it before and have the balance sheet to do it. If the geology can yield, we potentially have another mining industry under the ground here.”
Kramer said Saoga had been keeping a close watch on the massive gas finds in Mozambique, which had the potential to double the size of the Mozambican economy.
Mozambique had discovered 200-trillion cubic feet of gas.
“We can also see the geology yielding in Angola, Gabon, Côte d’Ivoire and Nigeria, but we don’t know whether it can yield at scale in South Africa.”
Kramer suggested the route for South Africa now would be to import LNG from Mozambique while simultaneously exploring for indigenous gas.
Recently, Saoga member companies visited Mozambique to understand the policy and tax environment, as well as other aspects of the industry.
“One of our aspirations is that South Africa becomes the oil and gas hub for East and West Africa,” Kramer told delegates