By Jessie Taylor
South Africa is looking to alternative energy models not only to support industry needs but as an economic catalyst. Oil and gas are major internationally traded commodities. For many countries, trade in oil and gas products makes a significant contribution to their GDP.
South Africa’s coastal waters are home to enough oil to support the country’s consumption for 40 years, and enough natural gas to supply 375 years of gas consumption – it simply remains for the government to unlock this wealth of natural resources.
Unlocking these energy options falls to the South African Government’s Operation Phakisa.
The Oceans Economy
Operation Phakisa, launched in 2014, looks to harness the largely untapped economic potential of the ocean. South Africa is surrounded by oceans on three sides, spanning almost 4000km, creating several vibrant industries that could help build the country’s economy. The cross-sector programme includes developing detailed and practical plans, which allow the government to fast track implementation.
The industries that have been highlighted as focus areas include tourism, fishing, shipping transport, ship repair and building, and oil and gas exploration.
Offshore oil and gas exploration has found an estimated nine billion barrels of oil and around 11 billion barrels of oil equivalent to natural gas. However, the extent of the country’s supply is uncertain at this stage, prompting authorities to set out a plan to drill exploration wells over the next decade. The goal of the Department of Mineral Resources is to drill up to 30 exploration wells in 10 years, with the hope that this will lead to the production of around 370 000) barrels of oil and gas per day within 20 years. This production of oil and gas would replace around 80% of the country’s imports.
But not only will the country spend less on imports, developing this sector has the potential to create 130 000 jobs, as well as contribute around $2.2 billion to the GDP.
A renewed focus on the oil and gas sector will breathe life into South Africa’s energy sector. South Africa has six oil refineries, but three of those are currently not operating.
Laying The Foundations for International Investment
However, there are several steps the Department is working to have in place before the first drill can begin.
Authorities are in the process of providing the legislative framework that will govern offshore oil and gas, and the Department is creating a division to regulate the licensing process for offshore oil and gas exploration and production.
While the progress on the Offshore Oil and Gas Exploration project is on or ahead of schedule, the Department requires that amendments to the Mineral and Petroleum Resources Development Act be passed by the National Assembly.
Other plans under Operation Phakisa include the creation of a world-class oil spill response capacity, which will involve carrying out emergency response drills with industry stakeholders. The department also has plans to create and make operational an International Oil Pollution and Compensation Fund.
The project is still in the early stages of research and exploration, but many national and international companies have expressed interest in investing in South African drilling.
One such company is Total, which has shown renewed interest after significant discoveries were made off the South African coastline.
Gas condensate was found in 2019 off the coast of Mossel Bay, followed by a 2020 discovery of gas nearby the first site.
The two finds increase the chances of Total, and in turn other multinational corporations, investing in local offshore sites. This kind of drilling could help kickstart the country’s oil and gas sector, launching South Africa as a major player in the African market.
The World’s Second-Leading Fuel
Research has shown that, globally, natural gas is expected to overtake coal by 2030 to become the world’s second-leading fuel – a direct result of the international move to reduce dependency on coal.
The development of a gas economy brings with the promise of export revenue, as well as an opportunity to develop domestic markets. With a focus on reducing reliance on coal resources, gas and oil are a natural alternative to addressing South Africa’s energy needs.