TotalEnergies pulled out of Brulpadda-Luiperd gas projects over pricing, parliamentary committee told

During questioning in Parliament about TotalEnergies’ pullout from the Brulpadda and Luiperd offshore gas projects — seen as a major blow to South Africa's efforts to attract investment to its gas sector — the Department of Mineral and Petroleum Resources (DMPR) admitted that an agreement could not be reached on the price that PetroSA or Eskom would pay for the gas.  

“The DMPR said it facilitated talks with PetroSA and Eskom and the end result was that the gas was deemed too expensive to reach an agreement with Total. It was not clear if this was the case with both SOEs [state-owned enterprises],” James Lorimer, a DA MP and the party’s spokesperson on mineral and petroleum resources, told Daily Maverick.  

Total said in late July that the discoveries were not commercially viable to develop, and many observers suspected that this was at least partly related to pricing. 

“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,” the French oil giant said at the time. 

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

The DMPR’s parliamentary presentation itself was along the lines of the “dog ate my homework” — scant on detail with nothing new and ending with the blindingly obvious conclusion: “South Africa is still experiencing challenges within the oil and gas sector development.” 

It said that developing the gas projects would translate into 42,500 jobs and add R22-billion annually to South Africa’s gross domestic product (GDP), lower than other estimates. That’s a massive blow to a barely growing economy with an unemployment rate well north of 40% by its broadest measure.  

“When I asked what company would now pursue the projects if Total could not make them work, they said there were companies interested but would not identify them,” Lorimer said about the committee meeting.  

Lorimer said he pointedly asked what consultants had been used for expert advice but received no response.  

The debacle was clinically unpacked last month in this publication by Claude de Baissac, the CEO of the advisory firm Eunomix. 

Read more: TotalEnergies takes its foot off the gas – why SA lost a huge energy deal 

“Apparently, neither PetroSA nor the then DMRE [Department of Mineral Resources and Energy] nor Eskom followed established international norms of hiring internal and external independent experts to understand, design the policies and programmes, make the decisions, sign the contracts, commit the expenditures, manage the myriad of highly complex social and environmental issues and regulations, and conduct the massive infrastructure work that comes with a project of such magnitude and complexity. 

“In essence, TotalEnergies and its partners were left without a vital competent counterpart,” noted De Baissac.  

There is much debate in South Africa about oil and gas exploration and development against the backdrop of the green energy transition and environmental concerns. 

But the point is that the DMPR — formerly the DMRE — has made gas a priority and if it wants to attract foreign investment to develop the sector and realise its economic potential, it needs to stop dropping the ball.  

This debacle mirrors other fumblings at the department under its minister, Gwede Mantashe, including the backlogs for applications for mining rights and the dithering over the selection of a competent partner to develop a functional mining cadastre. 

Read more: DMRE announces preferred mining cadastre provider – the main partner is first class 

The costs to the economy — and South Africa’s reputation as an investment destination — from this maladministration are mounting. DM