Transitioning to a greener future

Productive onshore gas discoveries and investment in production studies are bolstering Petroleum Agency South Africa’s case for promoting a switch to gas.

Silhouette image of oil and gas drilling rig in the middle of nowhere with dramatic sky

As things stand, natural gas supplies just 3% of South Africa’s primary energy. A significant challenge facing the development of a major gas market is the dominance of coal. Opportunities for gas lie in the realisation of South Africa’s National Development Plan (NDP) and the Integrated Resource Plan (IRP).

Petroleum Agency South Africa (PASA), the custodian of the country’s oil and gas resources, and which facilitates and promotes responsible investment into the sector, sees a major role for gas in helping the country transition to cleaner energy sources.

Recently, there have been exciting developments in the oil and gas sector. The application by TotalEnergies for the right to produce off the south coast of South Africa signals an exciting new phase. Extensive exploration has confirmed that a significant resource lies off the coast of Mossel Bay.

Onshore exploration prospects are opening up new possibilities in the Free State and the Karoo.

In 2022, Tetra4, a wholly-owned subsidiary of Renergen, started commercial production of liquid natural gas (LNG) from it’s plant in the northern Free State. In January 2023, the company’s helium plant became the eighth place on the planet to produce that gas.

These are initiatives and investments in which PASA has played a vital role, in assessing the exploration bids, in granting bids, in checking the environmental impact assessments to ensure that they comply with standards and liaising with developers in many other ways.

Helium onshore potential

When the SpaceX rocket launched in 2021, 11 tons of helium was used to propel it off the ground. Every computer microchip in the world is produced in the presence of helium and the world uses 85 tons of it every day. Although it’s a very useful element, it’s also a very difficult element. The result of that is that Renergen, the owner of the Tetra4 company that holds the first onshore petroleum production right issued by the Department of Mineral Resources and Energy (DMRE), has had to import much of its equipment and many of the skilled personnel it needs to commercialise the gas field.

However, as the project ramps up production, employment numbers will increase over time.

The field covers 187 000ha in the region of Virginia, Theunissen and Welkom. Hiring has increased rapidly since 2019 as the project ramps up from the first phase in which a pilot compressed natural gas (CNG) plant was constructed in 2016. The second phase, referred to above, encompasses LNG and helium. Production of helium is expected to grow from 350kg per day to five tons in the second phase. LNG for the domestic market and helium for export from this project will create an entirely new stream of energy options for South Africa.

Dr Phindile Masangane, CEO of Petroleum Agency South Africa.
Dr Phindile Masangane, CEO of Petroleum Agency South Africa.

The first sector to respond to the potential of this gas find was the logistics sector. Bulk Hauliers International Transport (BHIT) signed an agreement to take LNG to fuel 50 of its trucks, which should lead to lower operating and maintenance costs. Renergen has signed an agreement with TotalEnergies for distribution and sales and other manufacturers have since come on board. The economic spinoff of the work done by PASA is clear to see in these developments. Tetra4 has a loan from the Industrial Development Corporation to build a 107km pipeline network from Virginia and the Overseas Private Investment Corporation (OPIC), an agency of the US government, will lend Renergen $40-million (more than R600- million) over 12 years, further evidence of the positive economic benefits of this brand new subsector.

The International Energy Association (IEA) has published a report, Africa Energy Outlook 2022, which deals with the balancing of Africa’s developmental needs and the urgent imperative to move away from fossil fuels. The report concludes that a balance can be achieved.

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 has welcomed the report. PASA has consistently argued that South Africa’s road to net zero emissions will be via gas. As PASA CEO, Dr Phindile Masangane, noted in the context of major discoveries of oil condensate off the southern coast, “The development of these discoveries has the potential to replace more than 2 300MW of diesel-fired electricity generation in Gourikwa, Dedisa and Ankerlig, thereby reducing the carbon emissions from these plants by more than 50% while eliminating sulphur oxide and nitrogen oxide emissions, which are also harmful to the environment. Gas is therefore an obvious bridge to a lower-carbon future in South Africa.”

There are other onshore areas showing promise. The Department of Forestry, Fisheries and the Environment (DFFE) in 2022 issued draft regulations to govern the process of hydraulic fracking because the underground resources of the Karoo are again in the spotlight.

Various environmental studies are being done, including groundwater and geological studies. The geo-environmental baseline study for gas in Beaufort West undertaken by the Council for Geoscience has been completed and showed significant resources of shale gas. The study did not encompass any economic modelling.

The Virginia Gas Project
The Virginia Gas Project, a project licensed and approved by PASA, has the potential to create an entirely new subsector within the South African oil and gas sector. The helium plant pictured here started producing that gas in January 2023.

PASA will be responsible for the granting of any licences once the draft regulations are finalised.

Three natural gas exploration permits have been awarded to Tosaco Energy for the sandstone-rich area between Amersfoort and Balfour in the western part of Mpumalanga by Petroleum Agency South Africa. Two methane-gas exploration rights have been granted to Highland Exploration in the Evander area.

In 2022 a successful bid was made to drill for gas at the site of the Majuba Power Station. Kinetiko Energy aims to supply Majuba’s 20MW gas generator with fuel. Majuba is one of Eskom’s many coal-fired power stations which are facing closure in the province of Mpumalanga and one of several that might be switched to gas.

Kinetiko has a further two sites where it will do exploratory drilling: one near Sasol’s Secunda synthetic fuel plant and one to the south of that.

PASA will continue to promote, facilitate and regulate exploration and development of South Africa’s oil and gas resources, ensuring that sustainable development is promoted in a responsible way.

A key objective is to move increasingly to development and production phases, beyond just exploration.

The offshore TotalEnergies project and the onshore Renergen project encapsulate the kind of work that PASA wants to move towards, in search of economic benefit for South Africa.