(Paris) “Good for the climate and biodiversity”, “bad for the country’s economy, which will remain poor”: the withdrawal of TotalEnergies from two gas field exploitation projects in South Africa, announced on Monday, has provoked opposing reactions among environmentalists and oil sector analysts.
But everyone agrees that the decision by the French oil giant to draw a line under promising offshore gas fields is highly symbolic for the future of the entire oil and gas sector and the ongoing energy transition.
TotalEnergies is withdrawing from exploration block 11B/12B located off the southern coast of South Africa, where two significant gas discoveries were made, one at Brulpadda and one at Luiperd, 175 kilometers offshore.
“TotalEnergies has also decided to withdraw from the offshore exploration block 5/6/7,” in which its subsidiary TotalEnergies EP South Africa “holds a 40% stake,” the group added in a press release on Monday.
The French major cited the “difficulties encountered in developing and promoting” two gas discoveries made there “on the South African market” to justify its withdrawals.
These decisions are “a blow to South Africa, which planned to use this gas to produce more electricity” and reduce its dependence on coal, writes the specialist website Moneyweb.
Whale migration
“South Africa has lost its ability to monetize its gas, and will remain a poor country,” says Thierry Bros, an independent oil and gas analyst. According to him, TotalEnergies risked not making the most of its heavy investment given the technical and financial difficulties it encountered.
Analysts cite in particular the failure to agree on a gas price between TotalEnergies and the national oil and gas company PetroSA.
On the stock market, the decision had no impact. The share price ended down 0.63% on Monday, at 61.74 euros, a less severe drop than that of the market (-0.98%).
In fact, since Magellan, off the coast of South Africa, all sailors have described violent sea currents and difficult weather conditions. Oil or gas exploitation would require exceptional investments.
Block 11B/12B covers an area of 19,000 km2with water depths of between 200 and 1,800 meters. TotalEnergies holds a 45% stake in it through its subsidiary TotalEnergies EP South Africa, alongside Qatar Petroleum (25%), CNR International (20%) and the South African consortium Main Street 1549 (10%).
The project to exploit the Brulpadda gas field had triggered the ire of environmental NGOs in October 2022. The Bloom association and the South African NGO The Green Connection had notably denounced “South African deep-water drilling operations” likely to threaten “small-scale fishermen and spectacular biodiversity”.
This area is a very important place for the migration and reproduction of marine mammals such as whales and other cetaceans.
Gazprom enters
CNR International (20%) announced in early July that it was withdrawing from the 11B/12B field. In addition to TotalEnergies, Qatar Petroleum (25%) also announced its withdrawal on Monday.
Under the agreement that bound the four partners, “the withdrawing parties transfer their participation free of charge to each of the partners who do not withdraw”, specified the Canadian oil company Africa Energy Corp, which has “no intention of withdrawing” and should therefore eventually “hold a 100% participation in block 11B/12B”.
For the NGO Bloom, the withdrawal of TotalEnergies is “good for the climate and biodiversity”.
This is a “victory” both for citizen mobilisation in France and South Africa, “which denounced this project very early on”, and for “purely economic and geopolitical” reasons, argues Swann Bommier of Bloom.
“The 11B/12B deposit represented emissions of 336 million tonnes of CO over the duration of its exploitation2which is as much as South Africa emits in a year,” he says.
“TotalEnergies was a pioneer in offshore oil exploitation off South Africa, and the entire Western industry was waiting to see what they were going to do. Their renunciation is a major turning point,” he adds.
Another important element according to him is the entry of Gazprom into the game when the South African Minister of Energy announced in December 2023 that the Russian group would be awarded the project to recommission the country’s main gas-fired power station.
“Due to international sanctions against Russia, TotalEnergies could not take the risk as a gas supplier of entering into business with Gazprom,” said Mr. Bommier.
But the French group has four other deep offshore exploration permits in the country, including one acquired “recently” in block 3B/4B, he warns.