Seabed energy finds could unlock 50 000 South African jobs

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JEREMY MAGGS: Now here’s a question: could oil and gas beneath our seabed help fix South Africa’s growth and jobs crisis? There’s a new report that suggests offshore exploration could boost GDP [gross domestic product], create thousands of jobs and strengthen energy security. But here’s the caveat: if done right.

Joining me now is Dr Ross Compton, senior director of global policy at EnerGeo Alliance, to discuss whether this is genuine economic opportunity or maybe simply optimistic modelling. Ross, a very warm welcome to you.

Maybe in simple terms, and let’s start with this: how big could oil and gas be for South Africa’s economy? How much potential is there?

ROSS COMPTON: I think you characterise that correctly. I think there is a big opportunity there, and I think there’s a lot of history to exploration in South Africa that backs that up.

Exploration has been going on since the early ’70s, offshore South Africa, and then really more in earnest in the last few years, where projects have been able to get to a stage where we can understand what some of that potential is.

Particularly for projects like Block 11B/12B, and discoveries like Brulpadda and so on, we’ve got a good understanding of the potential that they bring to the fiscus in terms of GDP growth and so on, as well as job creation. So to use that particular example of Block 11B/12B, where we’ve probably got the best estimates of that potential, we think there’s a potential contribution to GDP of approximately R23 billion annually, which is obviously significant.

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In terms of job creation there, it’s around 20 000 jobs within that project alone. Then, of course, as you look to other projects, places like the Orange Basin, where there’s significant derisking from across the border into Namibia, as well as some exploration on the South African side, the overall job creation within the sector could be as high as 50 000 as those projects are built out over time.

That’s a variety of jobs; that’s across the whole supply chain and lifespan of the project. So that’s everything from very technical jobs to some unskilled jobs as well. There’s a lot of potential there.

JEREMY MAGGS: Let me pivot back to jobs in just a moment, but I’ll be a little bit sceptical here. In the past we’ve heard big promises before. What, in your opinion, makes current opportunity different?

ROSS COMPTON: I think that’s really a good caveat there. It’s good to not overpromise and make sure that the delivery is done correctly.

I think what is being done within South Africa as well as across the border is a real focus on ensuring that local jobs are provided. So that’s being built into the regulatory frameworks as much as it is within the governance of the players involved.

Some of the international oil companies are seeking very much to work with local suppliers and to build out the workforce using local personnel, and I think that’s really important going forward. But I think this isn’t necessarily about overpromising. I think we’re focusing on those projects where we’ve got the best understanding, and there’s still a lot of work to do.

So to understand that broader potential, it requires further exploration ultimately. Although, as I say, work has been going on since the early ’70s, there’s a lot more to do. We don’t have full coverage in a lot of areas.

We need modern data, modern geophysical data, to fully understand the subsurface and what the potential is. So it’s really important to get those projects going, to build out an understanding and to build that investment potential for companies to take the plunge.

JEREMY MAGGS: You mentioned the jobs trajectory, but how many real jobs are we talking about? And perhaps more importantly, for how long?

ROSS COMPTON: If you think about the lifespan of these projects, it takes some time to get going.

So the early stages of exploration, to be realistic, they don’t provide a great deal of local opportunity.

It’s once you collect that data, you analyse what’s there, you’ve got a good understanding of the subsurface, and companies move towards those next phases of exploratory drilling and then ultimately into production.

Once they’re building out infrastructure and producing hydrocarbons, then there’s a lot more job creation right across the supply chain in supporting those activities, whether that’s offshore, whether that’s onshore and supplying all of the necessary materials and provisions and so on, and of course, transporting those fuels to wherever they need to get to. So there is a lot within that.

The lifespan itself through to decommissioning is anywhere from 25 to 30 years and can be more. That’s a rolling situation all the time as different projects are brought online, and other projects are wound down over time.

So it is a long process. I think the important thing here, to your point on longevity, is to ensure that those skills are transferable, and a lot of the skills within the oil and gas sector in particular are transferable, including building on the supply chains and skills that are already in South Africa. We’re not talking about starting from scratch.

South Africa has got a long history with mining, for example, and the coal sector. It’s not to say there’s an immediate switch for the workforce, but there are a lot of transferable skills.

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Then if you look at the energy mix going forward and the energy evolution, bringing online different renewables projects, whether they be onshore wind, offshore wind, other projects like hydrogen and so on, they rely on a lot of the same skills, whether that’s engineering, whether that’s geology and geophysics, all of those sorts of things.

We are talking about a real injection of skills into the workforce, and I think there is a long-term potential there across different parts of that energy sector, and I do think it should be considered as an energy sector more holistically, rather than just focusing on oil and gas or coal or anything in isolation.

JEREMY MAGGS: I’m going to finish, and I’ll need a very quick answer. Realistically, and maybe I should have started with this, could domestic oil and gas really bring down electricity costs or fuel prices?

ROSS COMPTON: That’s a hard one to answer, to be honest. I think it has the potential. Yes, it has the potential, but there are a lot of factors to that because it relies on a grid being built out, it relies on infrastructure being built.

But certainly, having that domestic supply has that potential to do so because you’re not reliant on imports and the whims of geopolitical situations and potential supplies drying up and that sort of thing.

So yes, I think it has the potential to contribute significantly to the security of South Africa’s supply and also, being positive for the impact on individuals and what they pay for their electricity in the longer term.

JEREMY MAGGS: Thank you very much indeed. Dr Ross Compton, senior director of global policy at EnerGeo Alliance, appreciate your time. Thank you.

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