Boston, MA -- (SBWIRE) -- 01/28/2014 -- Upstream exploration has been experiencing a boom recently due to the increasing prospectivity of South Africa's underexplored offshore and as well as progress in the field of shale gas and coal bed methane development. Majors ExxonMobil and Total have joined Shell in exploring South Africa's offshore, while growing political support to move forward with shale development should see permits issued at some point in Q1 2014. All these developments point towards considerable upside to South Africa's oil and gas sector which will struggle to match growing demand over the coming years.
The main trends and developments in South Africa's oil and gas sector are:
- Interest peaked in South Africa's offshore potential with Shell, ExxonMobil and now Total exploring in the deeper water areas. Total has announced that it will begin drilling operations in its 11B/12B license in 2014. Shell also hinted that it would begin drilling operations in its Orange Basin permit at some point in 2014, although this has not been finalised.
- There has been significant concern regarding the Mineral and Petroleum Development Amendment Bill. Initially, the Bill was very ambiguous in parts particularly with regard to assets ownership rights. However, this has since been clarified outlining the government will take a 20% free carried stake in all new oil and gas ventures. Added to this, the government will have the option to buy a further 30% stake in a project, priced at market-related rates. This has served to calm investor fears of potential resource nationalism.
- In September 2012, South Africa's Cabinet announced the end of a temporary ban on hydraulic fracturing (fracking), which had been in place since April 2011. Bundu Oil & Gas, Chesapeake Energy, Chevron, Falcon Oil & Gas, Sasol, Shell and Statoil are among the players actively pursuing the development of shale gas in South Africa. Growing political support for shale gas development could see exploration permits issued from as early as Q1 2014.
- Coal bed Methane (CBM) could provide a more immediate remedy to South Africa's gas needs than shale. Australian company Kinetiko continues to see strong production flows from its Amersfoort CBM pilot wells. The company could book gas reserves from the project in Q1 2014, while commercial production could begin in the next few years.
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