The International Energy Association (IEA) has published a report, “Africa Energy Outlook 2022”, which tackles the supposed conflict between Africa’s developmental needs and the urgent imperative to move away from fossil fuels.
Both can be achieved, according to the report. A key factor in allowing Africa to continue to industrialise will be an uptick in the discovery and use of gas. If all the gas so far discovered in and off Africa was used, the continent’s share of global emissions would rise by 0.5% to 3.5%. Petroleum Agency South Africa (PASA) has welcomed the report as confirmation of its own findings.
PASA has consistently argued that South Africa’s road to net zero emissions will be via gas. As the Agency has noted in the context of major discoveries of oil condensate off the southern coast, gas can be a bridge to a lower-carbon future in South Africa and Africa.
The distribution of licences in the oil and gas sector is of vital importance to a national economy and this is one of the key functions of PASA. The progress being made on a gas project in the northern part of the Free State province, about 300 km south of Johannesburg, is illustrative of the progress being made in the South African oil and gas sector.
The triangle made up of the towns of Virginia, Welkom and Theunissen used to be rich in gold mines, but for many years yields declined and the area’s economy struggled with job losses rising steadily. A fortuitous discovery of methane gas on a farm in Virginia in 1998 led to the creation of a company and to some entrepreneurs requesting licences to explore. Which is where Petroleum Agency South Africa comes in.
PASA is responsible for evaluating, promoting and regulating oil and gas exploration and production activities in South Africa and archives all relevant geotechnical data. The Agency acts as an advisor to the government and carries out special projects at the request of the Minister of Mineral Resources and Energy.
“As the country’s first onshore commercial project, the Virginia gas project is exciting,” says Sibabalwenathi Magida, PASA’s Executive Manager: Communications and Stakeholder Relations. “We are looking forward to seeing some of the opportunities the industry can provide to the country being realised through the project,” she adds. Currently, natural gas supplies just 3% of South Africa’s primary energy. Opportunities for gas lie in the realisation of South Africa’s National Development Plan (NDP) and the Integrated Resource Plan (IRP).
In 2007 exploration rights to the Virginia area were granted to a company which later became Tetra4, a wholly-owned subsidiary of Renergen. In 2012 a full onshore petroleum production right was awarded and a full Environmental Impact Assessment was completed in 2017.
As custodian, Petroleum Agency SA ensures that companies applying for gas rights are vetted to make sure they are financially qualified and technically capable, as well having a good environmental track record. Oil and gas exploration requires enormous capital outlay and can represent a risk to workers, communities and the environment. Applicants are therefore required to prove their capabilities and safety record and must carry insurance for environmental rehabilitation.
The Tetra4 Virginia Gas Project is the only holder of an onshore petroleum production licence issued by the Department of Mineral Resources and Energy through PASA.
In the years since the first rights were issued, the project leaders have rolled out various aspects of the project, particularly related to contracts with manufacturers and transport companies for the use of liquified natural gas (LNG). But helium production was also on line. In October 2022, the commercial operation of the LNG plant came on stream and in January 2023, helium started being produced.
To put this into perspective, with the January announcement South Africa became one of only eight countries in the world to become a helium producer. There are now just 16 places on the planet where this valuable liquid is produced.
Renergen states that the economic (NPV) valuation for proved and probable reserves as of 2019 was R8.9-billion. Subsequent tests have suggested that the resource is even more plentiful than first thought. Helium is used in rocket launches and microchips and about 85 tons of it are used every day.
The potential economic spinoffs for South Africa – and the effect that the availability of LNG could have on making the country’s transport industry less reliant on imported fuels – will be enormous. And PASA has played a vital role in bringing this about, by issuing licences in a responsible manner. There is growing interest in South Africa as an investment proposition. Notes Magida, “We are observing a growing interest and positive support for the sustainable development of upstream oil and gas in South Africa.”
Transitioning to gas
The transition to cleaner fuels and renewables is inevitable if the world is to reduce the negative impact of climate change. South Africa is a signatory to the Paris Agreement and has committed to a “Peak-Plateau-Decline” carbon emission trajectory. The government’s policy is to diversify the country’s energy mix which is currently coal-dominated to a lower-carbon future by introducing proportionately higher renewable-energy resources such as wind and solar, into the energy mix as well as gas-to-power. Gas is estimated to burn less than half the CO2 emissions from coal and additionally has no SOx emissions.
Gas is therefore a suitable transition fuel towards a lower-carbon economy for South Africa especially since gas-to-power technologies are flexible and would therefore complement the intermittent renewable energy being added to the national grid. South Africa’s energy mix is changing to include more gas through importing liquefied natural gas (LNG), using shale gas if reserves prove commercial and developing infrastructure for the import of LNG.
Petroleum Agency SA plays an important role in developing South Africa’s gas market by attracting qualified and competent companies to explore for gas. Another major focus is increasing the inclusion of historically disadvantaged South African-owned entities in the upstream industry.
New PASA leadership
In 2023, PASA appointed an Acting CEO. Dr Tshepo Mokoka will serve as acting CEO until the PASA board concludes a recruitment process to identify a permanent CEO. Outgoing CEO Dr Phindile Masangane has moved on to a position in the private sector. Mokoka is eminently qualified for this important position. He has a PhD in Economics, an MCom in Economics and Honours degrees Economic Science and Science.
In addition, Dr Mokoka has many years of relevant experience as a key member of the Central Energy Fund (CEF), the body that has oversight over PASA.
On his appointment, Dr Mokoka said, “I am committed to leveraging my experience and expertise to steer the organisation through this transitional period. With the unwavering support of the leadership team, we will maintain our focus on achieving our goals and upholding the values that define us. Together, we will build upon Pasa’s legacy of excellence and ensure its continued growth and success.”