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    South African Finds Lack a Market: GlobalData


South Africa will need to create a future market for the gas, likely in power generation, as alternatives will be chosen to ease near-term gas scarcity.

by: Joe Murphy

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Natural Gas & LNG News, Corporate, Exploration & Production, News By Country, South Africa

South African Finds Lack a Market: GlobalData

Recent deepwater gas discoveries made by France's Total off South Africa could be "transformational" for the country, but right now there is "no clear route to market," GlobalData said on January 25.

Total made the play-opening Brulpadda gas and condensate discovery in February 2019, and followed this up with the Luiperd find in October 2020. These successes have stirred interest in South Africa's offshore zone.  Shell agreed to farm into the offshore Transkei and Algoa blocks in November in a deal with Impact Oil & Gas, while junior partners New Age Energy and Tower Resources secured a licence extension in December for the Algoa-Gamtoos area neighbouring Total's 11B/12B block.

Total's finds "offer South Africa the chance to develop significant gas resources and reduce its reliance upon imports," GlobalData analyst Conor Ward said. But offshore supplies would have to compete with piped gas from Mozambique, which meets 80% of the country's demand, and potential LNG imports in the future. 

Still, Brulpadda and Luiperd could be developed at a breakeven cost of only $3/'000 ft3, GlobalData estimates, while gas from Mozambique costs $6-7/'000 ft3.

The domestic gas outlook is also unclear, GlobalData said. South Africa's electricity sector is mostly coal-based, and so the country would need to develop new gas-fired capacity to carve out a market for offshore gas.

According to GlobalData, it is unlikely that offshore gas could be developed fast enough to prevent the closure of the Mossel Bay gas-to-liquids plant. The facility is running out of feedstock as the domestic gas fields that supply it are reaching depletion.

"The hurdles to development for Brulpadda and Luiperd are not insurmountable," Ward said. "But timing will be a key factor determining a path to monetisation as the discoveries will be unable to alleviate the country of its near-term gas shortage challenge.”