Oil Find off South African Coast
Earlier this month a large discovery of gas condensate was made off the coast of Mossel Bay. The discovery, located at the Burlpadda Prospect in the Outeniqua basin 175km out at sea, was made by oil giants, Total. The CEO at Total, Patrick Pouyanne, estimates the size of the find to be up to 1-billion barrels of oil equivalent.
Drilling at this location began in 2014 but was delayed due to the tough deep-water conditions of the region. It wasn’t until December 2018, after Total employed the Odjfell Deepsea Stravanger rig, that operations at the Brulpadda Prospect commenced. It has taken just two months of drilling to hit the gas condensate. Hence, the French company are planning on getting the necessary 3D seismic data for the area, which should be able to indicate the size and location of any other reservoirs. Favourable feedback would release Total to begin drilling at four additional prospects on the same block.
The Brulpadda Prospect, with all its promise, could be exactly what South Africa needs as they look to grow their struggling economy. However, the South Africa has an important role to plpay if they ae to use this situation to their benefit. Part of this would include the need to negotiate favourable terms with the finders, Total. Another core aspect would be the need to manage the tide of interest and prospect that will be coming their way. Stephen Larkin, CEO of Africa New Energies, says that the recent discovery off the South African coastline will bring no less than R1-trillion into the country over the next 20year period. On a similar note he adds, “Southern Africa has just become the hottest destination for hydrocarbon exploration in the world.”
Both of these newly birthed frontiers, money and international interest, will require good leadership in order to properly navigate the times ahead. Jon Hughes, the Managing Director of South Africa Bunker Trading (SABT), thinks that “the government needs to create robust and transparent partnerships with the private sector in order to maximize this opportunity as efficiently as possible.” This is vital for South Africa, not only to stimulate immediate economic growth but also to show competence to those who are watching on. Should the country take this opportunity by the horns, the way for investors could begin to clear as their confidence is restored in South Africa and all it has to offer. Hughes goes on to suggest that the government should attempt to establish a model similar to that of Norway, in which all proceeds derived from oil-based operations are invested in a sovereign fund, and each citizen is an equal beneficiary of this fund.
South Africa is in serious need of investment to boost economic growth. The country needs to capitalise on more than just the income that will be generated from the corporate taxes and royalty fees of this find. Rather, such a find presents the opportunity to stimulate the offshore industry for the country. More than this though is the opportunity for the country to grow the various industries impacted by the historical discovery. When offshore growth is stimulated ports become busier and in turn supports the ship building and repair industries. The growth of these industries could really mobilize South Africa’s economy and begin an important shift in market sentiment.