Editors’ note: Opinions expressed by contributors are their own.

French oil company Total S.A. announced in February an important new gas find off the southern coast of South Africa. This find in deep waters, marks a significant departure from previous explorations, which number some 300 offshore wells located in relatively shallow waters.

Total’s discovery was made by the country’s first deepwater well, using knowledge and experience gained from drilling in the harsh sub-Arctic conditions of West Shetland off Scotland. The well lies in the Brulpadda Block, an area of 19,000 sq km about 275 km south of Mossel Bay which is thought to contain about 1 billion barrels of wet gas containing some oil.  

The discovery is potentially significant for South Africa’s economy, as Claire Lawrie, senior managing director for FTI Consulting, said, “this find creates options for using South African gas finds for conversion to liquid fuels and to drive power generation.”

Total’s $154 million Brulpadda-1AX exploration well was drilled in 1,432 m of water to a total depth of 3,420 m by the Deepsea Stavanger semisubmersible rig owned by Odfjell Drilling. This project is a joint venture led by Total S.A. with a 45% working interest alongside Qatar Petroleum (25%), Cape Town-based CNR International (20%) and South African consortium Main Street (10%).

Starting in December, Total plans to drill up to four exploration wells at a cost of $100 million each, according to a Reuters report. Total’s success is expected to spur Exxon Mobil Corp. and the Italian group Eni Spa to start new exploration efforts in nearby blocks.

On land, there is also between 40 trillion cubic feet (Tcf) and 72 Tcf of shale gas in the Karoo desert awaiting exploration, according to a 2016 Council of Geosciences estimate.

“These new prospects will take time to develop, with up to a decade before offshore gas and the Karoo shale gas could get into the production stage,” Lawrie said.

How ready is South Africa?

The consensus is that South Africa has a lot of groundwork to cover over the next six to 10 years to be ready for the prospective gas boom.

On the legislative front, the long-stalled Mineral and Petroleum Resource Development Amendment Bill of 2013 has been withdrawn by the new administration under President Cyril Ramaphosa, who plans to replace the bill with a dedicated policy framework for the oil and gas industry. The new legislation needs to provide policy certainty and a transparent legal, regulatory and fiscal environment that is attractive to encourage foreign investment into further exploration and field development.

Early indications are that the new policy will embrace many of the proposals made by the South African Oil and Gas Association, an industry lobby group.

But South Africa suffers from both a skills shortage and a brain drain. The under- funded state education system has failed both students and employers. Also, many people in the declining mining industry with transferable skills and experience have elected to emigrate to Australia, Europe and North America, thus depriving the new developments in the oil and gas sector with people and skills.

The absence of a national gas distribution network, together with gas usage confined largely to the Johannesburg area where there are a few gas-powered electricity plants, raises the question of market demand. One domestic outlet is to build gas peaking plants to accompany the growth of South Africa’s renewable energy sector with the surplus being exported.

Is business ready?

South Africa is a major mining and manufacturing country. Cape Town harbor is a leading regional ship and oil rig repair and maintenance hub, while Sasol Ltd. and Petro SA are important local oil and gas processing and refining companies. The services sector has many companies able to offer low-value services, including light engineering, marine skills, security, construction, fencing, helicopter services and safety equipment.

But local companies with the right skills and capacity for gas exploration, development and production are few and far between. This means that during the next few years of exploration, major oil companies such as Exxon Mobil, Eni, BP, Total and Chevron will need permissive local content regulations to be able to rely on leading oilfield service providers such as Baker Hughes, a GE company, Schlumberger and Transocean.

The main opportunities for suitably skilled and capitalized domestic businesses will come during the production phase in a few years’ time, giving  local companies  time to prepare to service the needs of a growing gas industry.

In sum, based on early indications from deepwater drilling and substantial shale gas reserves in the Karoo desert awaiting an environmentally friendly approach, South Africa needs to establish a business friendly environment, develop an educated and skilled labor force and construct sufficient infrastructure before it will be able to enjoy a gas boom.