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South Africa is facing a significant setback as TotalEnergies recently announced its decision to abandon plans to develop the country’s largest gas discovery. This move has prompted the government to consider boosting support for foreign energy groups in order to tap into the potential of domestic gas reserves.
The Brulpadda and Luiperd prospects, located 175km off the country’s south coast, have the potential to provide a total of 1 billion barrels of oil equivalent. Total, which held a 45% stake in the prospects, had already invested $400 million in development. However, the French energy giant cited challenges in economically developing and monetizing the project as the reason for its withdrawal.
According to South Africa’s energy minister Kgosientsho Ramokgopa, the failure to exploit these reserves in a more commercially attractive manner is a missed opportunity. He emphasized the importance of working with players who can help the country tap into its domestic gas resources, which are more cost-effective than imported gas.
Industry investors, including former investment banker Jan Martinek, have expressed disappointment over the lack of cooperation from state-run petroleum company PetroSA in striking a deal to buy gas from the project. This, coupled with regulatory uncertainties in the gas sector, including a draft law giving the state a 20% interest in new exploration projects, has contributed to Total’s decision.
The government’s inconsistent approach to regulating the gas sector, combined with the looming gas shortages in the next three years, has raised concerns about the country’s energy security. With Sasol planning to halt gas deliveries from Mozambique in 2027, South Africa is in urgent need of viable energy sources.
While Total’s withdrawal from the Brulpadda and Luiperd prospects is a setback, there is optimism surrounding the potential for other energy projects in the country. TotalEnergies recently took over operating an oil exploration block on South Africa’s west coast, signaling continued interest in the region.
Moving forward, Canada-listed Africa Energy Corp (AEC) will assume 100% of the rights to the Brulpadda and Luiperd prospects and seek technical partners for development. Despite the challenges, there is a consensus among industry experts that South Africa’s gas reserves hold significant potential for economic growth and energy security.
In conclusion, while Total’s decision to withdraw from the gas project is disappointing, it underscores the need for greater collaboration between the government and energy companies to unlock the country’s energy potential. By leveraging domestic gas reserves and fostering a supportive business environment, South Africa can secure a sustainable energy future for its citizens.
