Boston, MA -- (SBWIRE) -- 11/10/2012 -- BMI View: With only limited conventional domestic reserves available, South Africa has learned to make efficient use of its natural resources. Synthetic oil production adds nearly 200,000b/d to the country's output, and this figure could exceed 250,000b/d by 2021. With an estimated 13.7tcm of shale gas resources in place, the country could also boost its gas and synthetic fuels output to meet growing domestic demand.

The main trends and developments in South Africa's oil & gas sector are:

- South Africa has limited oil reserves, which stand at about 15mn barrels (bbl), according to 2011 estimates from the Energy Information Administration (EIA). We expect this to decline over our forecast period, with just 13.5mn bbl expected in 2021. However, BMI expects liquids production to increase from an estimated 183,000 barrels per day (b/d) in 2011 to 290,000 in 2021.

- Consumption of crude is forecasted to rise steadily over our 10-year forecast period, broadly in line with GDP growth. We anticipate that domestic demand will rise from an estimated 610,000b/d in 2011, to hit 792,000b/d in 2021.

- A significant share of this consumption will be met with synthetic fuels (synfuels) derived from coal-to-liquid (CTL) and gas-to-liquid (GTL) processes. Local company Sasol owns the 160,000b/d CTL Secunda plant and state-backed PetroSA operates the 45,000b/d Mossgas GTL facility, which combined add nearly 205,000b/d to domestic liquids production. Sasol has plans to expand Secunda by another 30,000b/d and has proposed to build the 80,000b/d Mafutha plant. As a result, we expect synfuels production to grow from an estimated 160,000b/d in 2011 to 258,000b/d in 2021.

- Although there is the potential to source gas from the Orange basin and the onshore shale formations in the Karoo basins, we believe it is too early to adopt an overtly optimistic stance. Shale offers significant upside potential to our forecasts, particularly since the lifting of the moratorium on hydraulic fracturing (fraccing). Despite high interest from many investors, including Royal Dutch Shell, it would take several years to see large-scale production, which implies that the impact of shale gas may only be felt beyond our 10-year forecast period. With regard to the Orange basin, we believe that the development of gas production could grow much faster and we expect South Africa to produce 3.5bn cubic metres (bcm) of gas in 2012. We forecast that this will increase significantly over our forecast period, reaching 6.8bcm by 2021.

- Bolstered by strong macroeconomic growth, infrastructure projects and GTL, domestic gas consumption is set to increase substantially, from an estimated 5.16bcm in 2011 to 9.74 by 2021.

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