What does Brulpadda, Total’s offshore discovery, mean for SA’s future?
Table of Contents
1 Brulpadda Find
The finding of significant quantities of gas condensate on the Brulpadda, Total’s offshore discovery, prospects, located on Block 11B/12B in the Outeniqua Basin, 175 kilometres off the southern coast of South Africa. The find has ramifications for the energy sector and especially the gas economy in South Africa and has everyone including our president talking, but what does the find actually mean and how will it impact our industry.
Figure 1: Exploration Block 11B/12B indicating the Paddavissie fairway and the approximate location of the Brulpadda well. (Adapted from Oil & Gas Journal)
2 What does Brulpadda, Total’s offshore discovery mean for SA’s energy future
The Brulpadda find has the petrochemical industry a buzz, but what does it really mean for the industry and the greater South African energy landscape as a whole. We will not be paying less for fuel due to this find even though the communicated volume of gas and condensate is estimated to be in the region of 1 Billion barrels of oil equivalent.
To put that into perspective that is enough to run all of South Africa’s refineries (cumulative volume of 700 000 barrels per day) for just less than 4 years. The find is a form of gas condensate which is more of a light crude oil than an LPG or natural gas mixture and fortunately for our nation Mossgas is the only refinery in SA ready and equipped to run on condensate. So it would naturally be assumed that the condensate will be extracted for use in the Mossgas refinery, which couldn’t come too soon, since this refinery has been on the verge of closing down for the last year or two, due to the dwindling gas resources feeding the facility.
The gas / condensate find is still far from being commercially exploited. The gas is present over a relatively large vertical distance (57 metres), but it’s not clear how extensive the gas-rich area is. We simply won’t know until more holes are drilled, and three-dimensional seismic surveys are completed. The latest indications are that these three-dimensional seismic surveys will take the rest of the year to complete with the next drilling in the area only to commence in December 2019. These processes are merely to understand the layout, make-up and volume of the gas deposits to correctly plan the extraction of the gas.
The first gas from the well supplied for commercial purposes is estimated to only come on line in 2027, given the complexity of the geology and the harsh deepwater environment of the find and policy uncertainty in South Africa. So clearly this find still has a long way to go to truly prove itself and to become a viable resource for exploitation.
3 Impact on the SA gas industry
Upstream production in South Africa has fallen by over half in the past decade and recent exploration has proven unsuccessful. Despite the positive statements regarding the potential resource size of up to 1 billion barrels of oil equivalent in this discovery and the four nearby prospects, previous upstream projects in South Africa have been technically challenging to develop. The geology in the area is very complex and it is in a harsh deepwater environment. Projects such as Ikhwezi and Ibhubesi have undergone delays and reserve write-downs due to these difficulties.
South Africa’s only local source of natural gas was developed in the 1980’s with the Mossgas facility built to beneficiate the gas. Additional natural gas is imported from Mozambique to supply the gas industry around Gauteng and Mpumalanga. The Brulpadda discovery could have a similar impact on Mosselbay and the Mossgas facility as the Zohr discovery did in Egypt. At the time of the Zohr discovery, Egypt was starting to plan for a future where the domestic gas production would not be enough to keep up with local demand for gas.
Offshore production of gas is supplied to the Mossel Bay GTL refinery, which is one of the primary revenue generators for PetroSA. Over the past few years it has struggled to source the necessary gas to continue operations and has been using more costly condensate imports. With existing gas sources declining rapidly, additional supply of around 200-300 million cubic feet per day (mmcfd) by the early 2020’s is required to continue operations at the refinery.
Compared to other nearby gas discoveries that face significant delays, such as the Kudu development in Namibia or the giant fields in Mozambique and Tanzania, Brulpadda would be able to tap into a pre-existing local market where the infrastructure and demand is already present. This resurgence in gas supply to Mossgas and its potential yield for PetroSA, might very well reignite the slowly waning interest in the LNG import options and gas fired power stations the government has been considering without real action over the past few years.
4 Impact on South African Ports
The first benefit to the South African ports directly from the Brulpadda find will be through support services.The new find has been welcomed by the Transnet National Ports Authority (TNPA) and Mossel Bay Port Manager, Shadrack Tshikalange, saying so far the port’s role in the drilling expedition involved providing land and quay space for the logistics base operations, as well as marine services such as piloting, berthing, craft services and vessel and traffic control to the vessels involved in the exercise.
With other oil majors like ENI and Exxon also holding blocks for prospecting in the area, it would be reasonable to assume that more exploration activities will be coming in the short term. These exploration activities will require support from the local ports which will necessitate upgrades and expansions to accommodate the activities.
The end of February saw the initial works at the site of the Port of Ngqura’s future liquid bulk tank farm which will connect to a newly equipped liquid bulk berth. This comes ahead of the planned decommissioning and rehabilitation of the existing liquid bulk facilities at the neighbouring Port of Port Elizabeth, which will pave the way for Ngqura’s establishment as a new petroleum trading hub for Southern Africa. These projects have been in the pipeline for some time, but could not have been timed better to make use of the momentum generated in the industry.
In the medium term once the upstream projects have been given the go-ahead the ports and surrounding industries will definitely be required to supply materials and services in support of the project execution. The required expansions will be bringing much needed economic growth for the region and with the support of Operation Phakisa the major support mechanisms should be developed and in place.
It’s too early for South Africa to be counting its chickens. It takes years to develop a gas-field to the point where it is producing gas. Many things can change in that period. The Brulpadda find is at great depth, both below the sea surface and below the sea-floor. It will be challenging to develop in an area notorious for high winds and heavy seas. But the likelihood is that a modest-sized gas find on the South Coast would mostly be used in South Africa.
Compressing natural gas for long-distance export by sea is an expensive business. It needs major infrastructure; which South Africa currently doesn’t have. The country also doesn’t yet have a well-developed infrastructure for using gas, so the supply may initially be more than South Africa can consume.
But since there’s a captive market nearby, Total; an international, for profit company that will charge a market-related price for its gas – will almost certainly first try to sell it locally, rather than incur the cost of transporting it elsewhere. The most likely first candidates will be the PetroSA gas-to-liquids plant and the Gourikwa (diesel) power station near Mossel Bay.
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