PetroSA to Press Ahead with Development of New Offshore Gas Field

State-owned oil and gas group PetroSA will go on with appraising and developing the offshore F-O gas field with a view to producing gas from 2011.

PetroSA has embarked on extensive offshore gas exploration to feed its gas-to-liquid refinery in Mossel Bay. This year, PetroSA announced Project Jabulani, a R5bn [rands] extensive well-drilling programme to develop indigenous gas feedstock for the refinery.

In the company's latest annual report, Everton September, vice-president for new upstream ventures, said PetroSA would in the 2008-09 financial year continue with appraisal and development of the F-O gas field. This followed a delay in drilling an appraisal well in the gas field. Drilling in the well should have been done in the past financial year. The well would be drilled as part of Project Jabulani.

September said studies for design and installation of subsea infrastructure for the gas field were under way "with a view to completing engineering requirements to meet the target of first gas in 2011."

Development of the oil field would include stimulating the reservoir through hydraulic fracturing in order to enhance production. "The use of this hydraulic fracturing technique will be a first for South Africa and has the potential to unlock the value of other tight gas discoveries on the South African coast," September said.

Last year PetroSA got exploration rights over blocks 9 and 11a in the southern offshore area of SA. The F-O oil field is in Block 9. September said PetroSA would continue with the evaluation of oil fields in Block 11a for possible production.

The rise in oil prices during the financial year boosted PetroSA's profits, but "contributed to aggressive competition for securing producing or near-producing assets as well as increased demand for limited exploration and development resources, pushing the cost of acquisition of assets to new heights," September said.

PetroSA CEO Sipho Mkhize said Project Jabulani was expected to provide sufficient feedstock for the Mossel Bay plant's commercial production until 2014. Production at the Mossel Bay plant, an important source of revenue for PetroSA, fell in the past financial year. Mkhize attributed the reduced production to lower-than usual supply from the offshore gas fields.

With the start of Project Jabulani, feedstock to the plant would improve, Mkhize said. Also likely to boost supply to the plant was the restarting of production at the Oribi and Oryx offshore fields. The company suspended production in April last year for recertification of its Orca floating production storage and offloading facility.

PetroSA said last week it had put on hold the development of a 40,000 barrels-a-day coal-to-liquid plant in Limpopo. This was part of PetroSA's response to the government's proposal that PetroSA procure at least 30 per cent of all crude oil consumed in SA.

Mkhize said abundance of relatively cheap coal one thing was one of the things that attracted PetroSA to the project. This option was "placed in abeyance to allow key challenges such as water availability and carbon sequestration to be further investigated."

BBC Monitoring. Copyright BBC.