Risks and Rewards

Petroleum gas exploration banner Autumn2017

WORDS Yolande Stander   PHOTOGRAPH Nadene Smith

 

Renewed plans to prospect for more gas and oil off the Southern Cape coast have sparked countless questions surrounding the short and long-term implications for the region.

 

In search of new gas reserves to meet the country’s dwindling feedstock, PetroSA is investigating the development of a new offshore gas and associated condensate field to enhance its operations in Mossel Bay. The idea is to develop up to 19 smaller fields around the existing producing fields – about 85km offshore – which can be tied in commercially into the existing infrastructure.

Feasibility studies are currently underway to determine potential impacts, including social, economic and environmental effects.

PetroSA acting chief executive Kholly Zono says the proposed tie-in of new fields is not a long-term solution but will at least provide sufficient gas beyond 2020, which is the estimated time by which the local plant is expected to run out of gas based on the current business model. The tie-in aims to win some time to discover and secure feedstock.

“The longer term future of the Mossel Bay GTL refinery is likely to depend on the processing of both imported liquid feedstock and gas. The enhanced condensate processing study is at feasibility stage while the gas exploration project is finishing feasibility,” says Kholly.

In the first phase of the project, PetroSA proposes to develop the area known as the E-BK field with one gas production well, and the gas is to be exported along a new pipeline to a tie-in point at the existing South Coast 
Gas pipeline.

In future phases, additional wells may be drilled targeting hydrocarbon accumulations within the E-BK area. If these wells are deemed commercial, they will also be completed and tied back to the existing infrastructure.

The process starts with the use of non-invasive technology to analyse the geology of the area to determine the existence of possible gas or oil in a particular area. “Then we explore one small hole, just to test and analyse the data. If suitable, only then can drilling start – and even then there is no guarantee that the gas discovered will be a viable source.”

Should the data check out, the dividends are expected to start paying off in terms of production by 2020 or 2021. The project scoping report suggests the potential yield could be between 25 and 60 billion standard cubic feet (BcF) of gas, with additional surrounding in-place gas potential of between 200 and 900 BcF. This in turn is expected to translate into initial production rates of about 6000 to 10 000 barrels of condensate per day, and 40 to 70 million standard cubic feet (MMscf/d) of gas is anticipated during the first phase of the development.

Head of oil and gas South Africa at Standard Bank, Khwezi Tiya, says the perceptions of the possible amount of gas in South Africa differ vastly. “In terms of shale gas the United States Energy Information Agency, for example, estimates about 128 TcF while the Petroleum Agency of South Africa (PASA) estimates 40 TcF. These estimates can only be confirmed through exploration and it should be highlighted that this does not imply that the gas can be recovered in an environmentally and commercially sustainable manner, as detailed studies would be needed to determine that. In terms of offshore gas potential, there are no estimations as yet,” says Khwezi.

Over and above the feedstock security that a project of this nature could have for PetroSA, there are several other possible spinoffs, including job sustainability and potentially job creation.

Kholly says even in the exploration period there will be economic activity. “Unfortunately 60% to 70% of the skills needed in this phase are highly technical and will require people from outside the region, but once in production the local workforce will benefit.”

However, major spinoffs are expected in terms of indirect job creation as setting up the drilling infrastructure would mean bringing in the necessary equipment, catering, and other logistics to enable the crew to be self-sufficient at sea.

While it is too early to estimate the ultimate economic benefit, as these may be linked to how much gas exists, the import of gas into the economy is expected to benefit a wide range of support industries, which will ultimately create jobs and have a positive impact on the GDP.

While the rewards may be great, the financial risk is significant with the drilling of just one well totalling a whopping R1 billion, and PetroSA is pursuing several financial partnerships to lighten the load.

 

Environmental considerations

The proposed exploration area falls within the Bredasdorp Basin, Agulhas Bank, where marine life is prolific. It is important for fisheries and fish stock, and forms part of the migratory routes of species such as whales and sea turtles.

Among others, the area supports pelagic (not near the bottom or the shore) fish that supply west coast fisheries with anchovy, pilchard and horse mackerel as well as large migratory species like dorado, sailfish, a number of marlin species and several species of tuna.

The area is also rich in demersal species (bottom feeders), including Cape hake, kingklip, panga, kob, gurnard, monkfish, John Dory and angelfish.

Three globally threatened turtle species occur in the south coast region, and blue whale, fin whale and sei whale migrate through the area along the continental shelf edge. The Cape fur seal occurs along the south coast 
and is the only seal species with breeding colonies in the area, including one at Seal Island in Mossel Bay.

The scoping report, done by Cape Town-based SRK Consulting, recommends specialist studies to identify and assess potential impacts and to find ways to avoid or minimise effects. Potential negative impacts centre around the 
discharge of concentrated seawater and waste management, and its potential negative impact on marine life. The effects of underwater noise are also of concern, particularly on marine mammals.

 

Socio-economic considerations

The scoping report also recommends a socio-economic (fishing industry) study to assess the physical presence of the drilling unit, various support and supply vessels as well as sub-sea infrastructure installed on the floor of the ocean. The implementation of a 500m safety or exclusion zone around the sub-sea infrastructure will exclude any other users of the sea from these areas. Increased support and supply vessel movements in the general area, and between the production area and the coast, may interfere with the movements of other vessels.

Kholly says PetroSA views the potential environmental impacts in a serious light and will ensure best practices are implemented, and a thorough Environmental Impact Assessment (EIA) study is conducted. “There are many measures in place to ensure that a development like this does not harm the environment.

“The company’s existing operations are a prime example of how development and environmental protection can go hand in hand: marine life is flourishing around PetroSA’s FA Platform, which is 72km offshore.

He also sets the record straight regarding the incorrect perception that the proposed new exploration will include large floating structures – such as the Orca platform, which has been anchored in the Mossel Bay bay since June 2015 – that may impact negatively on the visual aesthetics of the bay and ultimately affect tourism, property and related 
industries. “The fields are 85km out at sea and not visible from the town. The Orca platform currently visible in the bay is a temporary oil production facility.”