Shell Upstream International has joined the hunt for deep-water oil and gas off South Africa's West Coast, but one of its priorities is to quell any hopes of quick riches.
The Dutch group sent executives this week to hold public consultation meetings in Cape Town and smaller centres like Lamberts Bay, Springbok and Port Nolloth.
"We are trying to keep expectations to a minimum," said Kim Bye Bruun, the Upstream unit's communication manager. "Nothing will be done on the ground for the next few years. This is a desktop study."
Shell won rights last November to explore a deep-water block the size of the Netherlands about 150km offshore, from Saldanha Bay to Port Nolloth.
If the desktop study, which could take three years, indicates areas of interest, seismic studies will be done. If those prove positive, test holes will be drilled.
It is a long process with no guarantee of results as shown by the Ibhubesi gas field closer inshore. Forest Exploration International found significant reserves there 10 years ago, but no gas has been piped ashore. In fact, no pipes have been laid to carry it.
Forest Exploration's commercial director, John Langhus, said it was impossible to say when the first gas would be delivered. "We can't predict that until we know what the demand for the gas is," he said.
"We're negotiating with parties about offtake of the gas. Once we get the critical level of commitments for the gas, then we can decide to move that forward."
Langhus said Forest saw the South African market as a big one, from electricity generation to industrial and residential use. "We're very optimistic about the growth of the market once it kicks off."
The problem is getting the market to kick off. Doug Kuni, managing director of the Independent Power Producers Association, said energy companies had yet to strike a deal with a South African buyer that would make it economical to start producing.
"All the exploration companies are spending dollars; they will require a dollar price for the gas. They will put it into a power station and produce electricity that will be paid for in rand. They don't want to take the currency risk."
Kuni said the energy companies wanted a Brent index in the pricing, but South African buyers were reluctant to commit. "Who knows where the price of oil will go?"
There had been more than 10 years of talks without a solution.
The minister of energy, Elizabeth Dipuo Peters, said in parliament this week that her department was in talks with a company to supply about 1500MW of electricity from a gas-fired power station on the West Coast, but she gave no details. "A memorandum of understanding will be signed once all the negotiations are finalised," she said.
Source timeslive.co.za
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