Government must not let Luiperd well be a wasted opportunity
The national government needs to create the business-friendly, regulatory certainty needed for international oil and gas firms in the Western Cape, and SA generally
Total’s announcement of a significant gas condensate discovery at the Luiperd well, just 175km off the coast of Mossel Bay, may be a wasted opportunity if national government does not create the business-friendly, regulatory certainty needed for international oil and gas companies to invest in the Western Cape, and SA generally.
Until recently drilling has been too challenging and costly for companies to explore the SA coast. The gas discovery of mid-2019 at the Brulpadda site is estimated to hold one-billion barrels of oil equivalent gas condensate, and if developed could see huge investment into our province and an estimated R1-trillion overall return for the economy over the next 20 years.
Gas condensate discoveries hold great potential for not only Total but local economies, in the Western Cape in particular. But international firms need policy and regulatory certainty of they are to inject the huge amount of capital needed to explore and later develop sites where gas is found.
The question is: can international energy companies pour hundreds of millions of rand worth of investments into a country that lacks both regulatory and policy certainty? Provinces also require this regulatory certainty to be able to attract much-needed investment and job-creating projects.
Already in 2020, Kosmos Energy, ExxonMobil and Equinor have sold their stakes in and licenses to explore SA’s coast for oil and gas reserves. Equinor sold its 35% stake while ExxonMobil sold its 40% stake in the Transkei, Algoa, and Tugela South exploration rights.
Other opportunities are simply more desirable to international firms, and the increased competition means that if this sector’s potential is to be realised national government needs to stop dragging its feet.
The mineral resources and energy minister, Gwede Mantashe, needs to finalise the Upstream Petroleum Resources Development Bill, which outlines national government’s position and plans for petroleum resources. A draft copy of the proposed bill was published in December 2019, and nearly a year later the minister has still not brought it to national parliament.
One of the keys aims of the bill is “to create an enabling environment for the acceleration of exploration and production of the nation’s petroleum resources”, but to achieve this aim national government needs to partner with international companies that have the expertise and capital needed to take full advantage of these natural resources.
Without the regulation necessary to give international oil and gas companies certainty, it is unlikely that these resources will ever be developed, and the opportunity for skills development, job creation, economic growth and energy security will be lost.
Total has indicated that it plans to engage with the SA authorities about the possible conditions of the gas commercialisation. Government must do all that it can to facilitate the development and commercialisation of gas in the country, which would lead to infrastructure development, employment opportunities and more environmentally-friendly energy generation.
The DA in the Western Cape has been calling for SA to move away from burning diesel and coal at its power stations and find greener alternatives. Which is why we have championed the conversion of power plants to run on liquefied natural gases (LNG) instead. Some power stations in the Western Cape, such as Ankerlig on the West Coast and Gourikwa in Mossel Bay, are currently in the developmental phases of converting the power plants from running on diesel to generating electricity using LNG.
Not only is LNG the more environmentally friendly option but it is also the most cost-effective method of generating power. The Ankerlig station, once converted, could see a reduction in carbon emissions of up to 907,000 tonnes a year and save 1.8-billion litres of water annually, while saving residents millions in the process.
Mantashe cannot afford to delay, as he did in finally gazetting regulations to allow for municipalities to generate and procure their own electricity through independent power producers (IPPs). This time we must see ramped up efforts and a commitment to an enabling environment for the safe, job-generating utilisation of our gas resources.
The Western Cape is on track to be the first province to beat load-shedding and become energy independent through its municipal energy resilience project, which supports municipalities in buying wholesale electricity from IPPs.
Energy security is paramount to making the province attractive for investment and creating the business confidence needed for employment opportunities. Poor economic growth, high levels of unemployment and poverty have been exacerbated by the unduly prolonged lockdown. President Cyril Ramaphosa’s proposed mass employment programmes through infrastructure building could be leveraged to lay down the infrastructure needed to make natural gas SA’s new energy generation resource.
However, this is only be true if national government is prepared to partner with local and global firms and through clear regulation create the business environment that is needed to make SA and the Western Cape desirable investment destinations.
Is cabinet in Pretoria prepared to seize the opportunity before it, or will it let yet another ship sail past?
• Baartman is DA Western Cape spokesperson for finance, economic opportunities and tourism.
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