Toronto-based Africa Energy Corporation (AEC), holder of a 10% interest in the significant Brulpadda and Luiperd gas finds offshore of Mossel Bay, said yesterday they would remain a shareholder and were confident the fields were commercially viable.
It said it was confident the fields could produce gas for South Africa during its transition away from coal-fired power plants.
AEC’s continued participation was good news for the project, as TotalEnergies South Africa, operator and 45% shareholder, confirmed yesterday also that it would exit the project because it was too difficult.
TotalEnergies said in a statement it withdrew from the Blocks 11B and 12B offshore exploration fields following a decision to exit the fields by another partner in the project, CNRI (Canadian Natural Resources International) which had held a 20% stake. QatarEnergy International, with a 25% interest, had also given notice of its exit of the project.
TotalEnergies said the fields could “not be turned into a commercial development as it appeared to be too challenging to economically develop and monetise these gas discoveries for the South African market”.
TotalEnergies had also decided to exit from offshore exploration Block 5/6/7 where is South Africa subsidiary currently held a 40% interest.
Exploration blocks 11B and 12B are in the Bredasdorp Basin, off the southern Cape coast, and wells from this basin have in previous years supplied the Mossgas gas-to-liquids refinery before running out and forcing the refinery to close. The government this year chose Russia’s Gazprombank Africa as preferred investment partner to restart the refinery.
Alex Levy, an international oil and gas project manager, said yesterday that TotalEnergies departure from its South African gas blocks “highlights the complexities and risks associated with large-scale gas exploration and development” in the region.
“The decision underscores the hurdles energy companies face in balancing ambitious projects with economic and technical viability,” Levy said.
“This withdrawal raises important questions about the future of gas exploration in South Africa (and) points to the necessity for a strategic reassessment of approaching large-scale energy projects in challenging environments.”
James Mackay, CEO of the Energy Council of South Africa, also echoed similar sentiments.
“This decision to abandon our domestic resource development highlights the very difficult trade-offs of the Energy Transition,” Mackay said.
“While it supports the global response to climate change, the supply will unfortunately just be developed elsewhere and South Africa domestic and economic benefits are lost.”
However, according to Siyanda Mngadi, a South African energy and minerals exploration expert, TotalEnergies’ exit presents an “opportunity for the newly formed state owned national oil company to takeover” the block.
Development of Brulpadda and Luiperd has been delayed and media reports attributed this to the government and TotalEnergies not being able to agree to commercial terms on the exploitation of the finds.
PetroSA said this month the Brulpadda and Luiperd discoveries about 175km offshore of Mossel Bay was a key enabler to reinstate its Mossel Bay refinery. The discovered gas could be processed on PetroSA’s offshore Gas Separation Facility.
PetroSA said it rejected “insinuations suggesting that the selection of Gazprombank Africa as a preferred partner, is the reason for TotalEnergies’ decisions to leave”.
TotalEnergies, the international energy group, has a broad portfolio in South Africa apart from offshore exploration, including 550 retail sites and nationwide LPG distribution for domestic energy.
It is also developing a 700MW portfolio of renewable energy projects in South Africa, including the 86MW Prieska solar plant, operational since 2016. In 2023, it signed agreements with Sasol and Air Liquide to supply 260MW of wind and solar capacity, and it has also launched the construction of a 216MW solar plant with 500MWh battery storage.
In terms of the Joint Operating Agreement on the Brulpadda and Luiperd finds, the other stakeholders had 30 days to also indicate if they intended to exit.
The withdrawing parties cannot sell their interests in terms of their agreement – their stakes are assigned free of charge to each of the non-withdrawing partners in proportion to their interest.
Meanwhile, the Department of Mineral Resources and Energy (DMRE) said it noted TotalEnergies announcement to exit from offshore blocks 11b/ 12b and 5/6/7.
“We are confident that a suitable investor will come on board and be able to monetise the gas discoveries. Additionally, we are pleased that TotalEnergies is not entirely leaving oil and gas opportunities in South Africa as they still hold exploration rights over Blocks Deep Water Orange Basin and Orange Basin Deep, Outeniqua South, and recent entry in Block 3B/4B east of Deep Water Orange Basin,” it said.
“The Department remains committed to the exploration of the country’s oil and gas resources and will intensify engagements with key role players to ensure the development and sustainability of the sector.”
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