New Market Research Report: South Africa Oil & Gas Report Q3 2013

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.

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

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* In September 2012, South Africa's Cabinet announced the end of a temporary ban on fraccing, which had been in place since April 2011. Bundu Oil & Gas, 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. 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.
* South Africa has limited oil reserves of just 15mn barrels (bbl), according to BMI's 2012 estimates. 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.
* 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 603,000b/d in 2012, to hit 773,000b/d in 2022.
* A significant share of this consumption will be met with synthetic fuels (synfuels) derived from coal-toliquid (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 2022.

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