French multinational TotalEnergies will exit the exploration blocks located off the southern coast of South Africa.
This follows a decision by its partner, CNRI, which recently announced its withdrawal from blocks 11B and 12B. The company will also be withdrawing from offshore exploration blocks 5, 6 and 7. TotalEnergies holds a 45% interest in blocks 11B and 12B and a 40% interest in blocks 5, 6 and 7.
“TotalEnergies entered blocks 11B and 12B in 2013 and discovered two gas reserves, Brulpadda and Luiperd. However, these reserves could not be developed commercially as it was deemed too economically challenging to monetise them for the South African market,” the company said.
The reasons behind the exit may have to do with the energy transition, James Mackay, CEO of the Energy Council of South Africa, said on social media. “This decision to abandon our domestic resource development highlights the very difficult trade-offs of the energy transition. While it supports the global response to climate change, the supply will unfortunately just be developed elsewhere, and South Africa’s domestic and economic benefits are lost,” he said.
Jaco Human, Executive Officer of the Industrial Gas Users Association of Southern Africa told Energize that TotalEnergies' exit, together with CNRI, means that 90% of the partnership has exited this particular venture, leaving Africa Energy as the only remaining stakeholder, which does not bode well for the South African market.
“These explorations are very risky and they’re very expensive, costing hundreds of dollars in exploration before they can be exploited for their worth, and so we need big international companies in these ventures,” he explained.
“The question is, what next? We have to monetise these resources, this is the only available bulk resource of gas in South Africa that is ready to be exploited. Right now our demand for gas outstrips supply and in the absence of domestic resources, South Africa will focus on importing gas in the form of LNG which is much more expensive,” he added.
“We have missed an opportunity. The project has suffered a temporary hold and we will have to see how the remaining parties move forward,” said Human.
The Department of Mineral Resources and Energy said in a statement that it was confident another suitable investor would come on board to monetise the gas discoveries.
“We are pleased that TotalEnergies is not entirely leaving oil and gas opportunities in South Africa as they still hold exploration rights over Blocks Deep Water Orange Basin (DWOB) and Orange Basin Deep, Outeniqua South,” the department said. TotalEnergies also recently entered Block 3B/4B east of DWOB.
The department said it has plans to intensify engagements with key stakeholders to ensure the development and sustainability of the sector.
