The withdrawal of French energy major TotalEnergies from gas field projects in SA was a “disaster” for the development of the block, Hosken Consolidated Investments (HCI) CEO John Copelyn has told the group’s shareholders, arguing that no industry has greater potential to grow the country’s economy than gas and oil.
Copelyn, who has been at the helm of HCI for 27 years, said in his letter to shareholders that the exit of TotalEnergies and other international partners would delay the projects.
HCI has exposure to the 11B/12B block off the southern Cape coast through its shareholding in Canada-based Africa Energy Corporation (AEC), which is the sole owner of the project after the exit of TotalEnergies, Qatar Energy and CNRI.
TotalEnergies spent $400m and was the operator of the project, which included the Brulpadda and Luiperd discoveries that President Cyril Ramaphosa had hailed as a “game-changer” in his 2019 state of the nation address.
TotalEnergies said at the end of July that it had decided to withdraw from the project, after the withdrawal of CNRI, because it appeared to be too challenging to develop and monetise it.
TotalEnergies has also said it would withdraw from block 5/6/7 off the west coast. AEC does not have exposure to this block.
HCI’s interest in AEC is held through its subsidiary, Impact Oil and Gas (IOG). Copelyn, a trade unionist turned business person, said IOG’s interest in AEC had not developed in the manner the group anticipated in last year’s annual report.
“Far from our operator pursuing the production right application, it has hesitated to do so and has finally confirmed its withdrawal from the block with other disgruntled international partners,” Copelyn said.
“This is ... a disaster for the smooth progress of the block’s development. Nevertheless, we intend to remain despite everyone else withdrawing.
“We still hope to secure the production right with a five-year gas marketing agreement as was previously contemplated.”
Jeopardy
Copelyn said AEC would search for suitable partners committed to developing the block but warned that it would not be smooth sailing.
“Even at best ... the future of the block is in great jeopardy as a result of our partners abandoning it. It is unclear whether we will be able to secure any sustainable value from it, but we do intend to try hard to do so.
“The additional exploration assets around the SA coast remain obstructed by litigation despite their obvious prospectivity. We were successful on appeal in having the Transkei exploration right re-established subject to the obligation to consult local communities more widely,” he said.
“Environmental groups have now launched an approach to the Constitutional Court to try to overturn this judgment and, while we do not believe they will succeed at court, the effect of their efforts will undoubtedly cause a further year’s delay in exploration.”
Copelyn was referring to the litigation that continues to delay the Wild Coast gas and oil exploration project, in which IOG has partnered with oil major Shell.
Challenge
IOG and Shell told the Supreme Court of Appeal in May that they had already spent just more than R1bn on the project, which was annulled by the high court in Makhanda in 2022 after a challenge by environmental groups.
Copelyn said that key to replacing coal-fired power stations, which are at the heart of SA’s electricity needs, were alternative sources of base electricity rather than total dependence on wind and solar.
“No matter the speed at which we introduce renewable energy or hydrogen-powered alternatives, this cannot replace baseload power stations economically in the coming decades. Its replacement, at least in part, with closed cycle gas turbines with less than half the carbon dioxide emissions of coal-fired plants is ... an important component of the solution.”
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