Major petrol company abandoning South Africa’s only offshore gas discovery

TotalEnergies has confirmed that it is abandoning South Africa’s only offshore gas discovery, leaving the Petroleum Oil and Gas Corporation of South Africa (PetroSA’s) Mossel Bay gas-to-liquid fuel plant idle.

In a statement on Monday, 29 July 2024, TotalEnergies said the decision to withdraw from the site — Block 11B/12B — follows the withdrawal of its partner CRNI.

“Following the decision of the partner CNRI to withdraw from Block 11B/12B, TotalEnergies also announces its withdrawal from this block, off the Southern coast of South Africa, in which its affiliate TotalEnergies EP South Africa holds a 45% interest,” it said.

TotalEnergies said it had made two gas discoveries in Block 11B/12B, Brulpadda and Luiperd, since it entered the site in 2013.

However, it said the discoveries ended up being too challenging to develop commercially and monetise for the South African market.

“TotalEnergies has also decided to exit from offshore exploration Block 5/6/7 where TotalEnergies EP South Africa currently holds a 40% interest,” it added.

According to energy policy and investment specialist Professor Anton Eberhard, TotalEnergies’ decision will cost South Africa hugely in lost royalties and economic opportunities.

“PetroSA’s gas-to-petrol plant remains idle, and Eskom cannot convert its expensive diesel plants to gas,” he said.

“Another own goal by mineral and petroleum resources minister Gwede Mantashe, who instead of facilitating this development allowed PetroSA to contract notorious politically-connected Lawrence Mulaudzi to raise finance for offshore gas, but whose company has now been liquidated.”

“Meanwhile, TotalEnergies, who spent more than R2 billion in exploration drilling, sails to friendlier waters off Namibia,” he added.

In April 2024, Democratic Alliance (DA) MP Kevin Mileham called for PetroSA’s gas deal with Mulaudzi’s Equator Holdings to be terminated. He said the granting of the R21-billion tender was irregular.

PetroSA awarded the tender to finance and refurbish its offshore gas infrastructure to Equator Holdings in December 2023.

Mileham said Mulaudzi was potentially using the deal for speculative purposes by shopping around for funding from anyone willing to invest, and “possibly securing a cut for himself”.

“The granting of the R21-billion tender to Equator Holdings was irregular as they did not meet the financial and technical requirements specified in the tender call for expressions of interests,” said Mileham.

“For this reason, the tender should be terminated with immediate effect and the circumstances that led to its awarding investigated.”

“The tender adjudicators at PetroSA failed in their fiduciary duty by either neglecting to conduct due diligence on Mulaudzi or choosing to look the other way despite the glaring red flags,” said Mileham.

He added that prima facie evidence shows that “PetroSA bent over backwards” to ensure Equator Holdings secured the tender.

Mileham said PetroSA ignored a Promotion of Access to Information Act application the DA submitted regarding the deal with Equator Holdings.

It requested that PetroSA provide a record of decision explaining the tender award, which occurred despite allegations that Equator Holdings did not meet its specifications.

It was alleged that the awardee didn’t have proven financial resources to carry out the project or the required technical knowledge and experience.

Equator Holdings had also been flagged for improper conduct at the Public and Investment Corporation.

Mileham said it had emerged that Mulaudzi doesn’t have the funding or technical skills to fulfil the tender requirements of rebuilding PetroSA’s gas infrastructure.

He also highlighted Mantashe’s silence over the controversy.

“Gwede Mantashe, has been eerily quiet despite the severe implications that this controversial deal will have on South Africa’s nascent gas sector should Equator be allowed to continue sitting on the tender without doing any work,” he said.

“Mantashe’s indifference lends credence to speculation that Mulaudzi might have been awarded the tender because of his political connections and no one is holding him accountable now because of the same political alliances.”