The recently released 2015 ANC National General Council discussion documents highlight the potential availability of oil and gas resources in South Africa as a game changer.
The documents also make the point that: “It is critical that the movement understands the political economy of the entire oil and gas industry, to ensure an appropriate political response is provided to shape its development in the interest of our people just as is aptly articulated in Norway’s ‘10 Oil Commandments’ policy”.
For us, the potential oil and gas discoveries present the democratic government with a unique and historic opportunity. We have also had to make an analysis of the different approaches by other countries to this sector, and we have found the Norwegian experience quite instructive.
Current developments
South Africa does not have a history of a large or vibrant oil and gas industry. Some initial exploration had been undertaken in the 1970s. Limitations of the then available technology, as well as the impact of sanctions, meant that most of the exploration activity, which was driven by the then Soekor, was limited to shallow depths, on average not exceeding 500m.
The best find of that period was the gas off the coast of Mossel Bay, which led to the development of the gas-to-liquids facilities now owned by PetroSA.
Recent discoveries of oil in South America, particularly in the Falklands Islands in 2010, have caused renewed interest on the South African coastline.
This is so because the current location of the Falklands was as a result of the break up of Gondwana in the early Jurassic period, about 184 million years ago. In those historic geological times, the Falklands were close to the eastern coast of South Africa, thus pointing to potential resources in South Africa. These, however, could be at depths of more than 1500m.
With regards to shale gas, it was always known that there could be gas in the sedimentary rocks that form the Karoo supergroup. The potential to extract shale gas has been given impetus by recent advances in technology, particularly in the US.
In looking at the Norwegian experience, we have also been conscious of the resolution on economic transformation taken at the 52nd national conference in December 2007, which was to “build the strategic, organisational and technical capacities of government with a view to a democratic developmental state”.
Contrary to those with a flawed understanding of a developmental state, at its heart it is both a strong partnership between the state and the private sector, as well as market-conforming methods of state intervention.
With oil and gas discoveries made in 1969, Norway centred its strategy on a deliberate process summarised under the ‘10 Oil Commandments’ policy. As a result, Norway is globally recognised as a model on how to ensure benefits for the country as well as ensuring the highest levels of governance. The country has also developed global companies in the oil and gas services value chain. In addition, it has used the resource endowment to set up a sovereign wealth fund, which will impact on future generations.
Critical challenges
While we see the potential for oil and gas discoveries in our country, none of this is proven until the companies commit risk capital to drill exploration wells to confirm the existence of these resources, and this will not happen if there is no enabling environment. Through the first phase of Operation Pharisee, which focused on the oceans economy, the government has identified the following outcomes towards enabling the sector:
* Provide clarity and stability in the legislative framework governing offshore oil and gas, ensuring a “win-win” outcome for the government, industry and society.
* Build a “one-stop shop” within the Department of Mineral Resources to streamline and regulate the licensing process for offshore oil and gas exploration and production.
* Conduct emergency response drills as an industry to initiate the creation of a world-class oil spill response capacity in South Africa.
* Make the International Oil Pollution and Compensation Fund operational.
* Exploit the research opportunities that will be presented by offshore oil and gas exploration projects that will unlock data on ecosystems, marine resources, and ocean-related renewable energy
In this instance, we would like the amendments to the Mineral and Petroleum Resources Development Act, currently in Parliament, to be finalised expeditiously.
Related to this, natural gas can provide an alternative to diversify the power supply. With the necessary regulatory certainty, it is estimated that South Africa could install up to 20 gigawatts of gas-fired power plants to diversify base-load by 2030.
South Africa’s electricity shortage continues to constrain growth, and despite new capacity, another shortfall is projected between 2025 and 2030. Natural gas plants are fast to build, entail low costs and have a low carbon footprint.
Other related issues we have identified include the following:
* Ensuring that the policy architecture is geared so as to best leverage the resources to enable job creation and wider economic development.
* Development of internal skills to be able to respond to the specific issues of the oil and gas industry, with the government to drive the development and expansion of relevant educational programmes and research capability, both at the university and vocational training level, with a focus on science and technology;
* Address the issue of enabling broad-based black economic empowerment in the sector, as well as the advancing the creation of black industrialists.
Our approach is consistent with our overall drive for a transformed economy and the development of a prosperous society. Our generation has been blessed with this historic opportunity and we dare not fail.
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Enoch Godongwana chairs the ANC's economic transformation committee, a policy sub-committee of the NEC.
** The views expressed here are not necessarily those of Independent Media.
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