Read part one of this article here.
Oil and other liquids production
South Africa’s upstream sector is organised under the purview of its national oil company PetroSA. The key commercial oil and gas fields include Oribi, Oryx and Sable, though these are mature and largely played out. Oribi and Oryx are currently not producing, and the Sable field, now known as the E-CE gas field, is producing natural gas to supplement feedstock for the Mossel Bay plant, which is PetroSA’s synthetic fuel refinery (described in more detail in a following section). Slightly to the east, the F-A gas field produces gas and condensate as feed for Mossel Bay also.
At the height, there were only five active rigs working in South Africa. In more recent years, there have been only one or two rigs, or none as production came on and off. As of January 2016, there was only one active rig in South Africa. Although over 300 exploration wells have been drilled in the offshore area, plus 200 onshore, actual production has almost vanished, and the current regime of low crude oil prices has stymied additional work. A number of offshore blocks have been awarded, however, to major companies including Shell, BHP Billiton, ExxonMobil, Canadian Natural Resources, Total, Anadarko, Cairn India and ENI. Although South Africa historically has chafed at the idea of being subjected to the constraints of the global oil price, it is very much back in that position.Natural gas liquids (NGLs) began to be produced in 1991, and production averaged 11 000 bpd from 1993 - 1998 before tapering down to 5000 bpd from 2008 - 2014. Crude and condensate production commenced in 1998, averaging 18 000 bpd. Production gradually ramped up to 54 000 bpd in 2004. But this was the peak, and production fell to 34 000 bpd in 2005, 20 000 bpd in 2006, and it dwindled to a mere 3000 bpd in 2014.
Transforming coal to gas and liquids
The great majority of South Africa’s liquid hydrocarbon production comes from its coal to liquids (CTL) and GTL plants. Sasol is now known around the world as the pioneer of commercial CTL production. Sasolburg and Secunda were built atop massive coal deposits. The original CTL complex opened in 1955, long before the world began to have concerns over energy supply security. The oil price shocks of the 1970s prompted the construction of Sasol Two in 1980, and its twin Sasol Three in 1983. Sasol Two converts approximately 50 000 tpd of low grade bituminous coal into a range of chemical and fuel products. Sasol also added a high purity ethanol plant at Sasolburg in 1990. In 1995, the first Sasol advanced synthol reactor came online at Secunda, geared to increasing production of light hydrocarbons such as olefins and synthetic gasoline.
The output from Sasol Two started at 4000 bpd in 1981. It ramped up to 20 000 bpd in 1982. As Sasol Three was commissioned, CTL output grew to 60 000 bpd in 1985. Liquids production grew to 77 400 bpd in 1991 with the completion of the ethanol plant, and another jump in output was achieved in 1995 with the new synthol reactor.
Sasol also made plans for a Sasol Four complex, but they were shelved. This was envisioned as an 80 000 bpd CTL plant known as Project Mafutha, to be built in the Limpopo District, which is in the northeastern part of the country abutting Botswana and Zimbabwe. The project fell out of favour because of issues regarding carbon emissions and carbon capture, and also about scale. At the time, PetroSA was pursuing a grassroots refinery project known as Project Mthombo, and the government believed that the output was better suited to the future demand pattern.
In 1993, South Africa commissioned its GTL plant at Mossel Bay. It was originally known as Mossref, then Mossgas, and now is often named PetroSA Mossel Bay. It is located due north of the offshore Block 9 production area that includes the E-CE gas fields and F-A gas and condensate fields. Feedstock arrives via pipeline. It was originally planned as a 25 000 bpd facility, but the design was expanded to 45 000 bpd during construction. Most of the output is oriented toward synthetic fuel, with a small amount of chemicals output also.
With the Sasol and Mossel Bay CTL and GTL plants onstream, the output of these synthetic liquids jumped to 172 000 bpd in 1993 and hit a peak of 185 000 bpd in 1997. Output since then has been approximately 150 - 160 000 bpd, with a slight downturn to 140 000 bpd in 2014. Unconventional liquids accounted for over 86% of South Africa’s total liquids supply in 2014. Without expansion and feedstock, however, output has tailed off. Total liquid supply peaked at 234 000 bpd in 2004, and it declined to 162 000 bpd in 2014. As noted, South Africa has a number of prospective oil and gas basins, and a number of offshore blocks have been awarded, but the current low oil prices do not encourage development.
Oil demand and change
The stagnation and gradual decline of liquid hydrocarbon production has not been matched by a decline in demand. South Africa is a net importer of oil and oil products, and the government remains concerned about import dependency and supply security. In 1981, liquid production was a mere 4000 bpd, whereas BP reported that demand was 270 000 bpd. Therefore, the gap between supply and demand was roughly 266 000 bpd. This level of import dependence was of great enough concern that it motivated the government to launch its world scale CTL and GTL industry. Yet demand kept growing, so that even at the peak production years in the mid-1990s, the supply gap never got narrower than 180 - 200 000 bpd. By the year 2002, the supply gap was 269 000 bpd – essentially back to where it was in 1981, when the government made huge investments to reduce import dependency. By the year 2014, the gap had widened to 445 000 bpd, leaving the government to ponder once again about what to do to reduce import dependency.
South African oil demand has not grown at break neck speed, but it has grown steadily. In many mature economies, oil demand is expected to begin to decline, as it has done already in some countries. But South Africa’s energy markets are not considered to be quite at that point, and the economy remains energy intensive.
Gasoline and diesel are the key fuels in the country. The relative roles of gasoline and diesel have reversed, however. In 1994, gasoline demand was 165 900 bpd (54% of the total), and diesel demand was 881 000 bpd (29% of the total). Yet gasoline demand grew modestly at an average rate of 0.3%/y from 2004 - 2014. In contrast, diesel demand grew at an average rate of 5.5%/y from 2004 - 2014. Over the decade, diesel demand surpassed gasoline demand, growing to 226 900 bpd in 2014 (47% of the total) while gasoline demand grew to 195 500 bpd (40% of the total). Demand for paraffin, fuel oil and LPG all declined over the 2004 - 2014 decade, while jet fuel demand grew at 0.6%/y. Over the period 1988 - 2014, demand for these fuels grew at 2.3%/y on average.
Part three of this article will be available soon.
Read the article online at: https://www.hydrocarbonengineering.com/special-reports/06062016/south-africas-energy-diversification-part-two-3439/