South Africa’s crude oil consumption over a 10-year period, starting 2012, will rise steadily, in line with GDP growth, to hit 788,500 barrels per day (b/d) in 2022, according to a study released Monday by the UK-based Business Monitor International (BMI).
“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,” said the South Africa Oil and Gas industry report, which BMI made available to PANA here.
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.
The study was carried out in 2012 when the country’s domestic demand was put at 618,000 b/d.
“This report analyses all main industry participants and indicators for oil and gas and LNG, forecasting market performance in 2013 and beyond,” BMI’s Head of Industry Research, Lyndsey Anderson, told PANA.
In BMI’s view, rumours abound that the traditional refinery operators in South Africa could abandon the country in the face of huge investment in capacity to meet higher fuel specifications.
Plans by the country to build a large new refinery were also causing concern, so the outlook for the downstream segment was uncertain.
“Upstream exploration has been experiencing a boom in recent months, thanks mostly to the government lifting, in September 2012, a temporary ban on hydraulic fracturing (a technology used for oil and gas production from deposits located in shale formations) which had been in place since April 2011.
“However, upstream effervescence does not solely rely on the country’s shale potential; there has also been growing conventional exploration in offshore acreage and in coal bed methane formations, suggesting that South Africa’s oil and gas industry could enjoy significant growth in the medium – to – long term,” said the report.
Among main trends and developments in South Africa’s oil and gas sector, BMI pointed out that in September 2012 the Cabinet announced the end of a temporary ban on fraccing, which had been in place since April 2011.
Bundu Oil , Chesapeake Energy, Chevron, Falcon Oil & Gas, Sasol, Shell and Statoil are among the players actively pursuing the development of shale gas in South Africa.
“The government’s decision will move the process forward, with public consultations the next step in an ongoing process to develop the country’s unconventional gas reserves,” BMI noted.
“Environmental groups have responded to the government’s decision by confirming they will file a lawsuit to prevent any actual production of shale gas, but Shell has said that following the government’s latest decision first gas from shale would be possible by 2015,” said the report.
“We expect this to decline over our forecast period, with just 13.4mn bbl expected in 2022. However, BMI expects liquids production to increase from an estimated 181,000 barrels per day (b/d) in 2012 to 289,000b/d in 2022.”
South Africa has limited oil reserves of just 15mn barrels (bbl), according to BMI’s 2012 estimates.
Meanwhile, Sasol has plans to expand Secunda plant by another 30,000b/d and has proposed to build the 80,000b/d Mafutha plant.
As a result, South Africa’s synfuels production is expected to grow from an estimated 160,000b/d in 2011 to 258,000b/d in 2022.
“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,” said BMI.
As regards the Orange basin, the firm believed that the development of gas production could grow much faster for South Africa to have produced 3.5bn cubic metres (bcm) of gas in 2012, with the output forecasted to increase significantly and reach 7.1bcm by 2022.
Bolstered by strong macroeconomic growth, infrastructure projects and GTL, domestic gas consumption is set to increase substantially, from an estimated 5.7bcm in 2012 to 9.7bcm by 2022.
In terms of infrastructure, many ambitious projects have been proposed, particularly in the downstream sector. The 400,000b/d Mthombo refining complex in Coega epitomises the country’s willingness to remain a leader in the sector.
The global oil and gas market having moved away from the cycle of tight global supply in 2011 and the first half of 2012, and with global production now comfortably meeting demand, BMI said it believed OPEC basket oil prices would decrease from their estimated average ofS$109.45 per barrel (bbl) in 2012 to $104.40/bbl in 2013.
“This fall in prices should cause South Africa’s import bill to fall despite the country’s growing oil and gas demand.
“Therefore, we see the country’s oil and gas import bill falling from an estimated $18.6bn in 2012 to $15.7bn in 2017 before rising back to $17.9mn by 2022,” the report added.