TotalEnergies Abandons South African Gas Projects, Focusing on Challenges and Economic Viability

In a significant setback to South Africa's ambitions to shift its energy dependency, TotalEnergies SE, the French multinational energy giant, has announced its withdrawal from gas-condensate discoveries off the country's southern coastline. This retreat represents a significant development for South Africa, which is actively seeking to diversify its energy sources.

The Brulpadda and Luiperd fields, seen as potentially instrumental in reducing South Africa's heavy reliance on coal, proved to be a significant challenge for TotalEnergies. Despite the considerable investment of at least $400 million in creative engineering to counter the high-velocity ocean currents, the company has deemed these discoveries too complex and uneconomical to progress into development for the South African market. This conclusion was substantiated by a recent Bloomberg report, which alluded to the non-viability of the project.

TotalEnergies' exit could not have been more ill-timed for South Africa. The country, which is entirely reliant on imported oil and gas, intends to pivot towards gas to cut back on its coal dependency, which currently dominates power generation. An estimated 1 billion barrels equivalent of light liquid hydrocarbons were discovered at the Brulpadda field in 2019 and success followed with the Luiperd well in 2020. However, plans to convert these finds into production have now been shelved.

The fields were also projected to supply raw material for PetroSA’s 45,000-barrel-a-day gas-to-liquids plant, but these expectations have now dissolved with the company's departure. Questions posed to South Africa’s mineral and petroleum resources department concerning TotalEnergies' exit have yet to receive a response.

South African Mineral and Petroleum Resources Minister Gwede Mantashe has been a staunch advocate for oil exploration, defending operations even in the face of environmentalist opposition. Mantashe emphasizes that the impasse in oil exploration is partially attributable to the lack of legislative clarity, which the new oil laws aim to remedy.

Though TotalEnergies is relinquishing its stake in the Brulpadda and Luiperd discoveries as well as exiting from oil block 5/6/7 off Cape Town, the company is not entirely withdrawing from South Africa. It retains interests in Block 3B/4B and territories adjacent to the maritime border with Namibia, where substantial discoveries have been noted.

With this exit, South Africa faces an even more challenging journey ahead in transforming its energy sector. The country must now explore other avenues to realize its goals of lowering emissions and diversifying its energy mix.