Blow to Mantashe as Total pulls out of Brulpadda and Luiperd gas discoveries off SA, citing no commercial case

29 Jul 2024

TotalEnergies says it is pulling the plug on its Brulpadda and Luiperd gas projects off South Africa’s south coast on the grounds that they are not commercially viable. This represents a fresh blow to Mineral and Petroleum Resources Minister Gwede Mantahse’s efforts to develop South Africa’s hydrocarbon sector.

Total said in a brief statement on Monday that its Brulpadda and Luiperd gas discoveries were not commercially viable to develop.

“Following the decision of the partner CNRI to withdraw from Block 11B/12B, TotalEnergies also announces its withdrawal from this block, off the Southern coast of South Africa, in which its affiliate TotalEnergies EP South Africa holds a 45% interest,” the French oil heavyweight said.

“TotalEnergies entered into Block 11B/12B in 2013 and made two gas discoveries, Brulpadda and Luiperd, which could however 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”

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The company went on to say that it “has also decided to exit from offshore exploration Block 5/6/7 where TotalEnergies EP South Africa currently holds a 40% interest”.

This represents a fresh blow to Mineral and Petroleum Resources Minister Gwede Mantashe’s efforts to develop South Africa’s hydrocarbon sector against the backdrop of the green energy transition and the global decarbonisation drive.

In the typical fashion of Big Oil, Total was opaque about the challenges to commercial development.

South Africa’s oil and gas policy framework is still being fleshed out, so investors still lack clarity around many issues.

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“What we don’t know and because Total is still interested in West Coast exploration, they will probably be too discreet to tell us, is whether this was because of technical difficulties or difficulties in obtaining an off-take agreements,” James Lorimer, a DA MP and the party's spokesman on Mineral and Petroleum Resources.

“The problem seems to be that that discovery is not large enough to build a plant to liquify the gas for export. The way you would have to sell it then is domestically. Those would have to guarantee Total that they had a customer and if not the thing is not viable.”

According to Bloomberg, Total has spent $400-million drilling in South Africa's challenging marine conditions. The Brulpadda field, discovered in 2019, is estimated to have at least 1 billion barrels of light liquid hydrocarbons.

The Department of Mineral Resources and Energy 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."

Shell said earlier this year that it was divesting from its downstream operations in South Africa – meaning its retail petrol stations – but remains committed to exploration.

Offshore oil and gas is a hot button topic in South Africa, with environmental groups opposed to such exploration, especially if it involves seismic surveys. The impact of such surveys on marine life is uncertain with the science all over the place, but they make some greens see red.

And with global efforts to cut the use of fossil fuels linked to climate change accelerating, oil and gas projects run the risk of becoming stranded assets in a few years time.

But South Africa’s economy remains dependent on hydrocarbon imports, it needs foreign investment, and gas shortages loom in a few years time. The bottom line is that policy clarity is needed. DM

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