Industry experts and environmentalists have warned that the euphoria around Total’s announcement of a gas find in the Outeniqua Basin, could be premature.
While politicians have hailed the find, the energy and environmental sectors are less enthusiastic about the French company’s discovery at Brulpadda, 175km off the southern coast of Mossel Bay.
They cite environmental concerns and volatile oil markets as reasons to curb enthusiasm. In his State of the Nation Address last week, President Cyril Ramaphosa said the government was “extremely encouraged” about the find.
“This could well be a game-changer for our country and will have significant consequences for our country’s energy security and the development of this industry,” he said.
Total said it found 57m of net gas condensate pay in Lower Cretaceous reservoirs.
Jesse Burton, of the Energy Research Centre at UCT said there wasn’t enough evidence to show whether this was a “technically” or “economically” recoverable reserve.
She said Total has been “circumspect” about the quantities involved.
“What matters is whether what is there can be extracted using current technology, at a cost that means it can be sold at a profit, or whether there is enough to even make extraction worth it,” Burton said.
There have been reports that the find represents one billion barrels of oil but, said Burton, this has not been proven “and in any case, this is only about four years of South Africa’s refinery consumption, and about 12 days of global oil consumption.”
And on the question of benefits to the country, she said more accurate data was needed.
“It is unlikely that this would mean cheaper inputs for South Africa, since oil and gas are globally traded commodities and companies sell them at the going price. It may be accompanied by benefits but this depends on how much is there and if it can be extracted using local expertise. We should of course bear in mind that without strong institutions and good governance, these benefits are often lost to the host country and a rush to extract oil in sensitive marine areas could come with all sorts of other costly problems,” she said.
Her concern is shared by Thuli Makama, Africa senior advisor at Oil Change International.
Makama said this announcement “is not great news” given its impact on climate change.
“The monetary value of this find for South Africa will be limited by the terms Total negotiates with government, and African governments have a worrying history when it comes to realising financial benefits from oil production.
“Fossil fuel development has come with a high price tag in the African context in terms of the resource curse that follows close behind.”
She said oil markets was set to be “highly volatile” over the coming decades because of abundant supply and climate policy.
“Expectations that this will be some kind of boom for South Africa should certainly be tempered. The future of energy is not oil and gas. South Africa can achieve energy access for all without taking this pathway,” said Makama.