Newly discovered oil reserves could transform the South African economy
As South Africa struggles to find the right formula to drive its economic growth, the country’s growth prospects have just received a major boost through the discovery of substantial natural gas deposits off its shore. Wood MacKenzie believes the discovery could be a “game-changer.”
Much like many other African countries, the South African economy has been disproportionately dependent on the oil and commodity trade, which has spelled trouble for the country since 2014 when global oil and commodity prices took a tumble. The country has been struggling ever since.
Diversification and innovation have been the mantras for the country, in addition to the new President’s elaborate plans to draw foreign investment in excess of $100 million to the country. Nevertheless, a new development has indicated that the pressure to diversify might just have eased considerably.
Exploratory drilling off the coast of South Africa has revealed reserves of natural gas and condensate. The discovery was made by France-based global oil conglomerate Total, which characterised the reserve as at par with world class reserves as one that could kickstart a substantial oil and gas trade.
Specifically, the firm placed the size of the reserves at approximately 1 billion barrels of oil and gas as well as other condensate material. The discovery has already drawn international attention, including from Qatar Petroleum, CNR International and South African firm Main Street.
According to experts at oil and gas consultancy Wood MacKenzie, the new discovery could be the impetus that South Africa needed, particularly as the country still continues to import oil and gas to meet its substantial energy needs. Reduced reliance on imports could make room for significant economic growth.
Vice President for Global Exploration at Wood MacKenzie Andrew Latham said, “Even though the well isn’t an oil discovery, if Brulpadda proves to be anywhere near as big as the estimates of up to 1 billion barrels of oil equivalent resources, it will still be a game-changer for South Africa.”
“While a strong case can be made for the development of the gas economy, long-term growth requires a clear plan from government,” added Principal Analyst for Commodity Analytics at Wood MacKenzie Akif Chaudhry, commenting on the proper course of action for the future of the reserve.
