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Orange Basin development highlights contrasting approaches to oil
Namibia and South Africa are taking different approaches to developing the Orange Basin, with regulatory certainty and environmental litigation emerging as key factors influencing future oil investment.
What: Namibia continues to attract offshore oil investment, while legal challenges are slowing exploration activity in South Africa’s section of the Orange Basin.
Why: Exploration permits can take up to five years to obtain in South Africa, compared with between three and nine months in several other African countries.
What next: A Constitutional Court ruling later this year could shape South Africa’s future approach to offshore oil and gas exploration and investment.
The Orange Basin is emerging as a test case for how African countries balance energy development with environmental concerns, with billions of dollars of investment, future tax revenues and thousands of jobs depending on how governments manage competing interests, according to Reuters.
Widening gap
Shared by Namibia and South Africa, the offshore basin has transformed Namibia into one of the world’s most promising oil exploration destinations. French supermajor TotalEnergies (EPA/LSE/NYSE: TTE) is targeting first oil from its Venus development offshore Namibia by 2030, with initial production expected to reach about 150,000 barrels per day (bpd).
South Africa, although it contains around two-thirds of the basin, has yet to make a comparable commercial discovery. The country has faced stronger and more frequent legal challenges to oil and gas projects than Namibia, as environmental groups and NGOs have made use of regulations that allow multiple administrative appeals and court reviews.
Two developments in June illustrated the widening gap between the countries’ approaches, Reuters said. On June 9, energy supermajor Shell (LSE/NYSE: SHEL) announced what it described as the “most promising subsurface results to date” from petroleum exploration licence (PEL) 39 offshore Namibia, where several significant discoveries, including Graff-1X in 2022, have confirmed the basin’s potential.
A week earlier, environmental organisations and fishing communities appeared before the High Court in Cape Town, South Africa, seeking to overturn a permit allowing global energy data company TGS (OSE:TGS) to carry out seismic surveys in South Africa’s section of the basin.
According to environmental justice group Green Connection, campaigners have launched at least four court cases and numerous administrative appeals against offshore exploration and proposed onshore liquefied natural gas projects in South Africa since 2021. The Petroleum Agency South Africa (PASA) said the legal challenges have delayed up to 10 exploration wells that had been expected to be drilled by 2030.
Lengthy permitting process
According to industry representatives, the permitting process in South Africa has become increasingly burdensome. The Offshore Petroleum Association of South Africa (OPASA) estimates that exploration permits can take up to five years to obtain, compared with between three and nine months in several other African countries. It warned that similar delays could hamper future development even if commercially viable discoveries are made.
“We cannot explore; we cannot spend money in a geography if we have to face courts permanently and the permitting becomes really too complex,” TotalEnergies CEO Patrick Pouyanne said during October’s results presentation when asked about South Africa.
The delays have already disrupted the company’s exploration plans. According to Reuters, TotalEnergies has intended to drill its first exploration well off South Africa’s West Coast this year, but the timing is now uncertain.
Attention has now shifted to South Africa’s Constitutional Court, which is expected to rule later this year on a long-running challenge to a Shell-led seismic survey along the Wild Coast. The case, first brought in 2021, is widely seen as a landmark because it will help define how environmental rights and the interests of coastal communities should be weighed against the country’s efforts to develop its offshore energy resources. Environmental lawyer Ricky Stone said the judgment could become one of the most significant precedents in South African environmental and constitutional law.
Encouraging signs
In the meantime, South Africa’s West Coast has shown encouraging signs, including the Ibhubesi gas field estimated to contain about 540bn cubic feet (bcf), equivalent to about 15.3bn cubic metres (bcm), of gas and 4.3mn barrels of condensate.
Estimates of oil and gas prospectivity in parts of Orange Basin on the West Coast of South Africa suggest potential to unlock up to 16 billion barrels of oil and 22 trillion cubic feet (623 bcm) of gas. These prospective estimates from PASA are based on various data points, including geological surveys coupled with recent and historical well data.
The Gazania-1 well, drilled by Eco Atlantic Oil & Gas (AIM/TSXV: ECO) in late 2022, discovered light oil-associated gas, but the find was not deemed to be commercially viable. The Toronto-headquartered exploration company has yet to deliver a commercial breakthrough offshore South Africa. Eco Atlantic CEO Gil Holzman argued that drilling could be carried out without damaging the environment or coastal communities. However, local fishermen continue to oppose offshore exploration, warning that it threatens their livelihoods.
Although some politicians in South Africa advocate wider adoption of renewables, the country’s Mineral and Petroleum Resources Minister Gwede Mantashe continues to back oil and gas development and has supported calls for specialised courts to deal with energy-related disputes more efficiently.
The contrasting experiences of Namibia and South Africa demonstrate that geology alone is no longer enough to attract investment. Regulatory certainty, efficient permitting and the ability to balance environmental concerns with economic development are becoming equally important in determining how quickly Africa’s newest petroleum province can be developed.