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S. Africa's Zuma Outlines Ambitious Oil Exploration Plans

  • Reuters

FILE - Chimneys from the Engen oil company are seen on the outskirts of Durban, South Africa.

FILE - Chimneys from the Engen oil company are seen on the outskirts of Durban, South Africa.

South African President Jacob Zuma outlined ambitious plans on Wednesday for oil and gas exploration in coastal waters that he said could contain as much as nine billion barrels of crude and vast quantities of natural gas.

In a speech to senior South African and Malaysian officials in the port city of Durban, Zuma said the government wanted 30 exploration wells drilled in the next 10 years.

"Over the next 20 years, this could lead to the production of 300,000 barrels of oil and gas per day," Zuma said, adding that the industry needed a legislative framework that would benefit both South Africa and participating firms.

But he stressed there was "significant uncertainty" about the extent of hydrocarbon resources in South Africa's waters, some of the last unexplored stretches of the continent's energy-rich coastline.

Much of the exploration effort in South Africa is being spurred by the recent discovery of massive natural gas reserves off the coast of neighboring Mozambique and Tanzania in east Africa.

Although blessed with an abundance of minerals such as gold, platinum and coal, Africa's most advanced economy has always been a major oil importer.

Zuma said nine billion barrels of crude was equivalent to 40 years of South African oil consumption, while gas deposits could amount to as much as 11 billion barrels of oil equivalent, equal to 375 years of consumption.

Jacques Roux, a consultant geologist at the state Petroleum Agency, said the estimates were "speculative resources", meaning they were untested and mainly in deeper waters and were derived from analysis of rock structures and seismic anomalies.

French multinational Total started South Africa's first deepwater drilling in July, in the Outeniqua Basin, 175 km (110 miles) south of the southern port of Mossel Bay.

Australian junior explorer Sunbird Energy has been developing South Africa's largest stranded gas field, Ibhubesi on the west coast, which has estimated reserves of 540 billion cubic feet of gas.

Other offshore blocks have been allocated to state petroleum firm PetroSA, domestic petrochemicals group Sasol, and international majors Shell, Anadarko, ExxonMobil and ENI, according to the Cape Town-based Petroleum Agency.

Automatic state stake?

Despite the interest, oil firms have been cautious about piling in because of uncertainty about South Africa's petroleum laws.

Parliament passed an amended petroleum bill in March that gives the state an automatic 20 percent stake in new gas and oil exploration ventures, a proviso that oil firms said at the time would have a "chilling effect" on investment.

However, Zuma has still not signed the bill into law, and in his Durban speech he alluded to the concerns, stressing the need for "clarity and stability in the legislative framework governing offshore oil and gas, ensuring a 'win-win' outcome for government, industry, and society."

There has been no explanation from government as to why the amended petroleum bill has not become law.

Zuma also said the mining ministry, which is ultimately responsible for hydrocarbon extraction, would have to create a "one-stop shop" to streamline licensing for offshore oil and gas exploration.