High hopes from majors for South Africa's deep offshore
Total has joined the crowd of majors flocking to South African waters
Total is the latest major company to take a position in South Africa's deep-water offshore, confirming unprecedented interest in the country's lightly-explored waters. Since early last year, Shell, ExxonMobil and Anadarko have also taken exploration territory, and extensive seismic work has been carried out and is planned.
In late September Total said it will explore an area off the country's south coast, acquiring a 50% interest in Block 11B/12B from Canadian Natural Resources, with that company retaining 50% and Total taking over the operatorship. The area, where water-depths extend from 200-1,800 metres, lies about 175 km offshore in the Outeniqua basin - and the country's existing small gas and oil fields lie just to the west. With seismic already acquired, Total plans to drill an exploration well next year.
ExxonMobil has opted for the east coast. In August the company received government approval for a farm-in agreement with the UK's Impact Oil & Gas, under which ExxonMobil will take 75% in a licence off Durban, with Impact retaining 25%. The agreement covers the Tugela South Exploration Right in the Zululand basin, together with three other areas covered by co-operation permits which Impact plans to convert to exploration licences.
Water-depths in Tugela South extend to nearly 2,000 metres, and in the other areas to 3,000 metres. Separately, ExxonMobil has also signed a cooperation agreement covering the Deepwater Durban basin, giving the company the right to carry out studies for a year.
Shell's choice was the west coast, where in February last year it signed to take 100% of the Orange Basin Deepwater licence - a vast area of 37,000 square km, extending south from the border with Namibia and in water 500-3,500 metres deep. With very little exploration having been carried out in the area, the company is implementing a three-year seismic programme in the initial phase of its licence.
Anadarko chose the southern part of the west coast, off Cape Town. In August last year the company farmed-in to Blocks 5/6 and 7, to form an 80:20 venture with the state's PetroSA. Anadarko completed 6,000 km of 2-D seismic work early this year and is planning a 3-D programme, to be acquired next year.
Other substantial right-holders include: BHP Billiton and Cairn India, both with areas off the north part of the west coast; PetroSA, with areas off the west and south coasts; South Africa's Sasol, with an area off the north part of the east coast; and Silver Wave Energy, Singapore-based but said to be Burmese-owned, which holds much of the east coast deep water. Afren also participates, and a number of little-known companies hold rights.
But while company interest is rising, the government is planning changes to oil laws which could deter new investments. Changes to the 2002 Mineral and Petroleum Resources Development Act, going through parliament at present, will allow the state to take an unspecified interest in all new oil and gas ventures, and to nominate two directors to the ventures' boards. There is also a provision requiring companies to process some of their output in the country. Companies including ExxonMobil, Shell and Anadarko have criticised the measures, in submissions to a parliamentary committee, saying they lack clarity and will reduce profitability.
The appeal of South Africa's deep-water offshore is that it has seen little exploration with modern techniques - a consequence of the country's apartheid years, when international investments were difficult to attract. A small number of deep-water wells have been drilled off the west coast but most of the east coast deep-water is undrilled, according to a map produced by the government's Petroleum Agency SA.
Shallow-water exploration in the 1970s and 1980s by state-company Soekor, a forerunner of PetroSA, produced a number of small gas and oil discoveries in the Bredasdorp basin, off the south coast. Gas is landed from PetroSA's F-A field and its satellites for use as feedstock at the gas-to-liquids (GTL) facility, also operated by PetroSA, at Mossel Bay. By the end of the year the company's Project Ikhwezi is due to start-up, connecting the F-O field to F-A facilities though a 40 km tie-back. F-O will flow for six years, PetroSA says, and outlying prospects could keep the GTL plant supplied beyond that until 2025.