TotalEnergies is calling it quits at multiple offshore blocks in South Africa with QatarEnergy joining exodus from two huge gas discoveries

TotalEnergies EP South Africa, a subsidiary of France’s energy giant TotalEnergies, has made up its mind to pull out of several blocks off the coast of South Africa after its partner in one of these blocks decided to do the same. QatarEnergy, Qatar’s state-owned energy heavyweight, has jumped on the bandwagon heading for the exit from one of the blocks containing two large undeveloped gas discoveries.

Following the decision of CNR International (South Africa), a subsidiary of Canada’s CNR, to withdraw from the joint operating agreement (JOA) for Block 11B/12B, TotalEnergies embarked on a review of its options concerning its 45% stake in the block. The company has now decided to follow CNRI’s example and exit Block 11B/12B off the Southern coast of South Africa.

After entering the block in 2013, the French giant used Odfjell Drilling’s Deepsea Stavanger semi-submersible rig to make two gas discoveries, Brulpadda and Luiperd, which could not be turned into commercial developments since economically developing and monetizing these gas discoveries for the South African market seemed too challenging.

The company’s partner, Africa Energy, has confirmed that TotalEnergies and QatarEnergy have notified the joint venture partners in Block 11B/12B about withdrawing from their 45% and 25% interest, respectively. Under the JOA, the withdrawing parties assign their interest-free of charge to non-withdrawing partners in proportion to their stakes.

Notwithstanding the mass exodus, Africa Energy, through its 49% investment in Main Street 1549 which currently holds a 10% interest in the block, does not intend to withdraw from the asset, as it remains confident that these resources can be commercially developed despite the challenges and delays encountered so far.

The company’s determination to develop the Brulpadda and Luiperd discoveries arises from the knowledge that these are perceived to be the largest discoveries of natural gas resources in South Africa. Therefore, they have the potential to supply a significant portion of the country’s energy needs, if developed, while options are pursued to transition away from coal-fired power plants.

The withdrawal of CNRI, TotalEnergies, and QatarEnergy from Block 11B/12B is subject to all relevant regulatory approvals by South African authorities. Once all relevant regulatory approvals are out of the way, Main Street 1549 expects to hold 100% interest in Block 11B/12B, enabling it to focus on the block’s production right approval and securing offtake customers.

On the other hand, TotalEnergies has also decided to leave offshore exploration blocks 5/6/7 where it currently holds a 40% interest. After removing these blocks from its portfolio, the French player will be left with exploration rights over blocks Deep Water Orange Basin and Orange Basin Deep (west coast), Outeniqua South (south coast), and the recent entry in Block 3B/4B east of DWOB.

Aside from oil and gas assets, TotalEnergies is also developing a 700 MW portfolio of renewable energy projects in South Africa, including the 86 MW Prieska solar plant, operational since 2016. Last year, the firm made arrangements with Sasol and Air Liquide for 260 MW of wind and solar capacity and launched the construction of a 216 MW solar plant with 500 MWh battery storage.

The exit from an offshore block in South Africa is also being pursued by Canada-headquartered Eco (Atlantic) Oil & Gas, which recently announced its plans to give up its interest but also took steps to take over a majority stake and operator role at another offshore block in the Orange Basin, which is said to be on trend with recent giant oil discoveries offshore Namibia.