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Thursday, 04 July 2024 10:43

Total to ditch SA offshore gas finds - prioritise exploration in areas closer to Namibia.

By Francois De Beaupuy and Paul Burkhardt.

TotalEnergies SE plans to exit its discoveries of gas-condensate off the tip of South Africa to prioritize exploration in other areas closer to Namibia, according to people familiar with the matter.

The French giant braved one of the fastest ocean currents in the world to drill off South Africa's coast, spending at least $400 million to find an estimated 1 billion barrels equivalent of light liquid hydrocarbon at the Brulpadda field in 2019.

It had further success at the Luiperd well the following year, but neither discovery has progressed to development.

TotalEnergies plans to relinquish the license for Block 11B/12B because it doubts whether the complex deep-water finds can be made commercially viable, given South Africa's small gas market, said one of the people, who asked not to be named as the information isn't public.

The company will concentrate instead on exploring the Orange Basin, located further north on the Atlantic coast of South Africa near promising oil discoveries in Namibian waters, the people said.

In March, the French oil major agreed to buy a stake in the 3B/4B offshore block in the South African part of the Orange basin, where it already owns other exploration rights together with various partners. It’s currently working on the development of a first oil project in Namibian waters.

A spokesperson for TotalEnergies declined to comment.

An exit from the discoveries would be a blow to South Africa, which lacks domestic sources of oil and gas.

Potential production from the fields had been earmarked in plans to help the country move away from a dependence on coal and provide feedstock for state-owned PetroSA’s 45,000-barrel-a-day gas-to-liquids plant that depends on other depleted fields nearby.

Africa Energy Corp., which is also a partner in the offshore blocks, said in a statement on Monday that it has been advised that TotalEnergies' local unit "is currently reviewing its options" related to the oil and gas finds.

CNR International (South Africa) Ltd. has given notice that it will withdraw from its 20% interest in the discoveries, according to the statement. Africa Energy, which currently holds a 10% interest in the block, does not intend to withdraw.

A spokesperson for Petroleum Agency South Africa referred questions to Total.

South Africa has struggled to bring oil and gas developments onstream in a timely manner amid legislative uncertainty.

The passage of a new hydrocarbon law awaited by explorers has dragged on for years. At the same time, environmental groups have stepped up campaigns to block seismic surveys and other activity planned by Shell Plc and other companies.