TotalEnergies, a major French oil company, announced its decision to withdraw from an offshore natural gas block off South Africa’s southern coast. The company cited significant challenges in developing the gas finds commercially. This move is a setback for South Africa’s ambitions to achieve energy independence through its largest offshore gas discoveries.
Earlier in the month, TotalEnergies hinted at its intention to exit Block 11B/12B. This decision has now been confirmed, dealing a blow to South Africa’s efforts to leverage its offshore resources. TotalEnergies entered Block 11B/12B in 2013 and discovered two significant gas reserves, Brulpadda and Luiperd. Despite these discoveries, the company determined that turning these reserves into a viable commercial development was too difficult. In its statement, TotalEnergies did not elaborate on the specific challenges but highlighted the economic and logistical difficulties of the project.
Environmental concerns and bureaucratic hurdles have plagued oil companies operating in South Africa’s offshore zones. The rough seas and strong currents add to the exploration complexities. These factors have dampened investor enthusiasm, further complicating efforts to exploit the offshore gas reserves. TotalEnergies’ exit follows a similar decision by its Canadian partner, CNRI, to withdraw from the same block. South Africa’s government had hoped that the gas from Block 11B/12B could supply an idle gas-to-liquid plant at Mossel Bay, operated by the national oil and gas company, PetroSA.
TotalEnergies held a 45% stake in Block 11B/12B. The company has also decided to exit offshore exploration on the west coast in Block 5/6/7, where it held a 40% interest. Despite these withdrawals, TotalEnergies is maintaining its stake in Block 3B/4B, located on South Africa’s side of the Orange Basin. This area is just south of significant discoveries by other major companies, including Galp, Shell, and TotalEnergies’ own Venus discovery in neighboring Namibia.
The withdrawal from Block 11B/12B reflects the broader challenges faced by the oil and gas industry in South Africa. Environmentalists have been vocal in their opposition to offshore drilling, leading to multiple court challenges. These legal battles, combined with regulatory delays, have created an uncertain environment for investors. The physical conditions in the offshore zones, characterized by rough seas and strong currents, further complicate exploration and development efforts.
The exit of major players like TotalEnergies and CNRI raises questions about the future of South Africa’s offshore gas industry. The government’s plans to develop these resources have been hampered by the challenges faced by the industry. The withdrawal of these companies could slow down the progress of offshore gas projects, affecting South Africa’s energy diversification efforts.
