The discovery of crude oil by French oil and gas major Total in offshore South African could soon herald a gradual decline in demand from Nigeria and could constrain about N340bn worth of crude oil bought from Nigeria in the last three months of 2018.
According to latest International trade figures released by the National Bureau of Statistics (NBS), export to South Africa from Nigeria amounted to N340.05 billion and crude oil accounted for nearly 98% of the trade value.
Depending on how fast the field is developed and how many news are have reserves, Nigeria could be preparing to see South Africa stop sending orders for crude oil cargoes to supply feedstock for its six refineries.
In February, Total announced an offshore discovery that could contain 1 billion barrels of oil equivalent of gas and condensate resources, after drilling its Brulpadda prospects on Block 11B/12B in the Outeniqua Basin
“It is gas condensate and light oil. Mainly gas. There are four other prospects on the licence that we have to drill; it could be around 1 billion barrels of total resources of gas and condensate,” Patrick Pouyanne, Total Chief Executive said.
The Brulpadda well encountered 57 metres of net gas condensate in Lower Cretaceous reservoirs. The well was extended to a final depth of 3,633 metres and has also been successful.
“With this discovery Total has opened a new world-class gas and oil play and is well positioned to test several follow-on prospects on the same block,” Total’s senior vice president for exploration, Kevin McLachlan, said in a statement.
Gwede Manthashe, South Africa’s mineral resources minister said the discovery is a potential major boost for the economy.
Africa’s most industrialised economy, which imports most of its refined petroleum products and crude oil, will see imports fall as soon as the fields start producing. After the confirmation of Brulpadda’s potential, Total and its partners plan to acquire 3D seismic data this year, followed by up to four exploration wells on the licence, the company said.
South Africa also want to build its gas network and has previously mentioned the possibility of importing LNG from Mozambique, where a gas pipeline already supplies most of the gas South Africa uses to power its industrial heartland in the north. The proximity of the find to Mossel Bay’s gas-to-liquid plant is also a boon, said national oil and gas company PetroSA.
The African Energy Chamber (AEC) said this is a great first step for the country in cutting imports of oil and gas and the discovery could change the course of South Africa’s economy. This discovery is driving a new wave of majors drilling in the area, hoping to find the next billion-barrel discovery.
South Africa is currently working on new legislation that would separate the conditions for exploring and exploiting oil and gas resources from those for traditional minerals.
This could complicate Nigeria’s current problem of finding buyers for its crude cargoes which are often stranded at sea. Worse still, competition is emerging from other sources. Libya’s 180,000 bpd el- Sharara fields is back to production after being shut by instability in the region. Egypt has achieved its highest production of crude oil and natural gas in its history last month, producing 1.8 million bpd.
This development could further worsen Nigeria’s crude oil market as South Africa is Nigeria’s fourth largest oil market after India, Spain and France. The United States which used to be the highest buyer of Nigerian crude now buy the least ordering only N187bn worth of oil in the last three months ending December 2018.