First deep-water well to boost oil and gas industry

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Dineo Faku and Bloomberg

THE first drilling operation off the country’s continental shelf is expected to start today, signalling a boost for the fledgling oil and gas industry.

Total E&P South Africa (Tepsa), a local arm of French multinational Total, and its partner Canadian Natural Resources International will operate the deep-level well about 180km south of Mossel Bay in the Western Cape.

Drilling is expected to reach a depth of 3 500m in 1 500m of water. Depending on weather conditions, the programme will take between three and four months at an estimated cost of more than R2 billion.

Tepsa holds the exploration rights to conduct seismic surveys, exploration and drilling in the block in the Southern Outeniqua basin. The exploration well will be called Brulpadda-1AX.

Mineral Resources Minister Ngoako Ramatlhodi, who yesterday officially launched the drilling operation, welcomed the investment. “Drilling in deep-water is novel to South Africa and will, therefore, also bring with it avenues for skills transfer in the deep-water exploration space.”

Ramatlhodi told Bloomberg yesterday that draft oil and gas regulations would form the basis for the industry to address concerns over pending resource legislation. “We’re… waiting for the final signature on the bill to release the regulations. We can then begin to engage the industry on the acceptable figures and I hope when we achieve that, that we will have created certainty.

“If there’s a feeling that we need to put elements of the quotas into the main bill and we are agreed, then maybe we can do some amendments in that regard.”

Ramatlhodi said previously that the country’s oil and mining laws might be split.

The amendments to the Mineral and Petroleum Resources Development Act were passed by Parliament in February, but President Jacob Zuma has yet to sign them into law.

The bill will allow the government to have a 20 percent free carry stake in new oil and gas projects and an option to acquire an additional 30 percent portion at market-related prices. This has been a sore point for investors.

The drilling comes as oil and gas may be declared a strategic resource, which could results in controls on prices.

South Africa imports about 70 percent of its petroleum requirements but is seen as a potential new player in shale gas extraction. It is estimated that there could be R1 trillion of shale gas reserves in the Karoo that could help to make the country self sufficient.

The government placed a moratorium on shale gas exploration in April 2011, which ended in September 2012.


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