Nersa corrects official's comments on TotalEnergies, SA gas finds

The National Energy Regulator of South Africa (Nersa) has corrected comments by one of its officials which indicated that TotalEnergies planned to stay invested in its South African gas finds.

The comments were made last week by Thulebona Nxumalo, Nersa's head of piped gas, during a recorded meeting. He said Nersa had reached out to TotalEnergies, and "what they indicated is that they had initially planned to exit, but following engagements that they've had with government and other stakeholders, they've decided to stay".

"So, it sounds like they will be staying for now on that Brulpadda project," Nxumalo said.

Nersa issued a statement on Wednesday evening saying "the brief talk about the TotalEnergies's position on the Brulpadda and Luiperd gas fields happened in passing during an inquiry by TotalEnergies about regulatory requirements for gas supply."

"The inquiry was aimed at understanding the regulatory requirements applicable to the supply of gas and LNG projects... The Nersa official may have not reflected the correct position of TotalEnergies with regards to the Brulpadda and Luiperd project... that decision rested entirely with TotalEnergies and Nersa was in no way trying to speak on behalf of TotalEnergies on this matter."

TotalEnergies has previously declined to comment on the issue.



Speculation mounts

The clarification came as speculation mounts over whether TotalEnergies will exit block 11B/12B off the coast of Mossel Bay where two significant gas finds were made at the Brulpadda and Luiperd wells respectively. Canadian Natural Resources International (CNRI), which holds a 20% stake in the block, recently informed stakeholders of its plans to exit. In terms of the joint operating agreement, the other stakeholders have 30 days to also indicate if they intend to exit.

The regulator further noted it does not regulate activities pertaining to the upstream exploration for gas, but only regulates mid-stream and downstream activities - including projects pertaining to the supply and production of natural gas and LNG. "As such, Nersa does not have a licensor-licensee relationship with TotalEnergies pertaining to its upstream activities," it said.

One source with intimate knowledge of the developments said South Africa's gas-to-power programme is a key gripe of TotalEnergies.

It could have been an enabler for the gas find, but instead it was structured in a way that does not support indigenous gas production. The programme limits each project to 1 000 megawatts, and talks to peaking power rather than base load. It further indicates that after five years, utilisation rates may be decreased. "Are you expecting TotalEnergies to outlay US$3 billion to US$4 billion for you to utilise the gas power less than 25% of the time?" the source asked.

Adding to the frustrations, it certainly does not help that the production licence for 11B/12B is still in the works, almost two years since the application was lodged.



Biggest problem

Other industry sources, however, say the biggest problem relates to the technical aspects of the deepwater find, which - in turn - bolsters the development costs. The Brulpadda and Luiperd wells are located in one of the fastest ocean currents in the world.

"That project was always going to be a mess," said one oil and gas investor, who wished to remain anonymous.

"Technically, it's almost impossible to develop, and it is super expensive, because of the currents... if it was the only potential field in South Africa, then maybe everyone could join together, hold hands and make it work, but the West Coast of South Africa - where the Orange Basin extends - has so much more potential and less technically challenging, so that is worth the focus of Total."



- News24