Johnny Copelyn, head of one of the biggest investors in oil and gas exploration in SA and Namibia, has accused President Cyril Ramaphosa of being “evasive” about his government’s position on oil exploration, an activity that has come under attack from environmentalists.
Copelyn, one of the longest-serving CEOs on the JSE through his leadership of Hosken Consolidated Investments (HCI) since 1997, told the group’s shareholders that Ramaphosa has not shown his hand on whether his administration supports oil and gas exploration in the country. HCI has an interest in exploration vehicle Impact Oil and Gas (IOG), which Copelyn chairs.
“There is substantial litigation opposing such exploration work. The president ... has been particularly evasive as to whether he supports such work or not and it is unclear whether this will completely inhibit SA developing its own oil resources despite the obvious prospectivity of the blocks concerned,” writes Copelyn in a letter to shareholders, published in the group’s annual report.
“Such inhibition will of course oblige the country to continue to import its requirements at close to double the cost per barrel to the country. We say this because total taxes on such oil production are about half the cost of the product.”
Copelyn was an ANC MP in the first democratic parliament from 1994 to 1997. He served as general secretary of the SA Clothing and Textile Workers Union for many years before his appointment to parliament. He also chairs Deneb Investments, eMedia Holdings, Southern Sun and Tsogo Sun, in which HCI owns large chunks.
The president in 2022 told the Africa Mining Indaba that SA must be given space to extract oil and gas.
Presidential spokesperson Vincent Magwenya dismissed Copelyn’s accusation as unconstructive, unsubstantiated and a bid to get media headlines.
“As we speak, the president is chairing another follow-up meeting with business, which demonstrates the deepening commitment for collaboration between government and business as well as other social partners. It is not for the president to promote individual companies. That is not his job as outlined by the constitution,” Magwenya said.
“If there is a regulatory issue that is impeding sector progress, there are channels available for the resolution of any such regulatory impediments that may exist. Shouting at the president is simply unhelpful.”
IOG was awarded a technical co-operation permit in 2016 by the Petroleum Agency SA over the Orange Basin Deep block. Multinational energy giant TotalEnergies joined as operating partner in September 2017.
The company also holds an exploration right for the Transkei & Algoa blocks. Its most promising project to date has been in Namibia.
The HCI subsidiary has a 20% stake in two deep-sea blocks off the southern Namibian coast, known as Venus.
The project’s operator, TotalEnergies, in 2022 reported it had discovered “significant quantities” of light, sweet oil and associated gas within the area.
Copelyn said the development costs of blocks like these “are way beyond the funding capacity of HCI and it is virtually impossible for HCI to remain with an effective 10% interest in them”. HCI has already funded IOG to the tune of $65m (R1.1bn) of its $130m budget in 2023.
Legal wrangles
“IOG has initiated a process to sell down its interest in the blocks, which we expect will gather steam as soon as the appraisal results of the planned wells are known,” Copelyn said.
HCI flagged litigation as a factor inhibiting the development of local resources, adding that legal wranglings will occupy all parties involved for the coming year and more.
In September the Eastern Cape high court set aside a 2014 decision by the mineral resources & energy minister to grant oil and gas exploration rights in the Transkei and Algoa exploration areas.
Environmentalists opposed to the minister’s decision said they were concerned about the impact exploration would have on whales and other marine life. Numerous other appeals against gas and oil exploration are before the courts.
“These legal campaigns are increasing investment risk, stifling investment and making it very difficult to progress exploration activities ... While the above-ground risks remain challenging and an obstacle to progressing our SA portfolio, the subsurface continues to offer a compelling and exciting exploration opportunity,” HCI said.
Business Times reported in May that minerals & energy minister Gwede Mantashe was adamant the government will not back down in developing SA’s nascent upstream sector despite legal challenges by environmental groups.
Another IOG flagship investment in the oil and gas space is its 36.5% stake in Africa Energy, a Canadian oil and gas exploration company focused on SA.
Africa Energy’s block off Mossel Bay is said to contain commercially viable gas. Project operator TotalEnergies has applied for a production right and HCI said it expects it to be granted by year’s end.
“We believe a key to the future of this block is whether a new 1.2GW dual-cycle gas-fired power station can be developed in Mossel Bay, supplied directly from gas from this discovery.
Emissions
“The direct use of gas without the need to liquefy it offers an amazing opportunity for generating cheap base electricity sorely needed in the country,” Copelyn said.
“Emissions from such a power station are less than a third of those of coal-fired plants for the same amount of electricity generated and the expected down time for production stoppages [is] minuscule relative to the current record of Eskom coal plants.”
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