THE biggest risk facing SA in exploiting its potential onshore and offshore hydrocarbon deposits was wasting time, South African Oil and Gas Alliance (Saoga) CEO Ebrahim Takolia said on Thursday.
Addressing the two-day Africa Oil and Gas Summit in Sandton, he said global energy markets were changing and the US was about to become a substantial exporter of liquefied natural gas. That would drive down fuel and gas prices and could make it economically unviable for SA to exploit its own resources.
SA would lose the opportunity for import substitution and substantial job creation in both upstream and downstream industries. A number of local and international companies have started seismic studies into shale gas in the Karoo and deepwater oil around the coast, but only one — Total — is drilling offshore.
Mr Takolia said SA spent about R200bn a year on importing crude oil and earned about R300bn a year from exporting minerals. It imported about 380,000 barrels of crude oil a day and about 110,000 bbl of refined products per day.
Most of this was from Saudi Arabia, Nigeria and Angola, with a positive trend towards importing more from African oil producers.
“We expend a lot of energy on mining and spent most of the funds it generates on importing energy,” Mr Takolia said. “If we changed that equation in a meaningful way it would have a significant impact on the South African economy.”
Khwezi Tiya, a senior banker in Standard Bank’s oil and gas unit, said if SA had only the lowest estimate of 12-trillion cubic feet of shale gas, it could generate power equivalent to one-third of Eskom’s current total generation capacity.
Progress in developing SA’s oil and gas resources has been delayed by the need for technical regulations for shale gas drilling and for an overarching legal framework for oil and gas exploration. The draft Minerals and Petroleum Resources Development Amendment Bill, which covers both mining and hydrocarbons, has been criticised for its heavy government “free carry” provisions in oil and gas.
Mineral Resources Minister Ngoako Ramatlhodi said this week that the bill could be sent back to Parliament. The oil and gas industry had convinced him that there should be a separate framework.
Mr Takolia said Saoga, other industry bodies and companies had been lobbying heavily for the industry to have separate legislation from mining, with terms that would be favourable to the government while still incentivising exploration. Conditions for offshore exploration in SA were challenging, requiring specially stabilised rigs.
A reasonably thorough exploration programme offshore would cost about $2bn, which would all be capital at risk as the final result could be negative. The soonest that SA could start bringing commercial quantities of offshore oil or gas into production was between seven and 10 years.
Mr Takolia said, at best, SA could bring production on line from shale gas within 10 years. After regulations on shale gas were in place, it still had to be determined if there were viable quantities and if technical and environmental issues could be resolved.