July 03, 2015

WARREN DICK: Good afternoon, my name is Warren Dick and I’m the editor of Mineweb.com. Six of the top ten global oil and gas discoveries in 2013 were made in Africa and Africa now has proven natural gas reserves of 513 trillion cubic feet, with 91% of the annual natural gas production coming from Nigeria, Libya, Algeria and Egypt. Joining me on the podcast to discuss how it will be possible to monetise Africa’s gas sector is Malcome Logie, Technical Director for Environment and Energy at WSP Parsons Brinckerhoff Africa. Good to have you with us Malcolme.

MALCOLME LOGIE: It’s great to be here, thanks for the time.

WARREN DICK: So we’ve seen this story evolving over the last couple of years as lots of these discoveries are starting to be made in different parts of the continent. Just take us through a couple of the hot spot areas where the opportunity exists to develop this gas and oil industry.

MALCOLME LOGIE: Well, traditionally oil and gas is focused in West Africa, starting sort of Angola way up to Nigeria into Mauritania. Over the recent past we’ve had quite a lot of significant finds of gas particularly on the East Coast of Africa being Mozambique, Tanzania, Uganda and into Ethiopia.

WARREN DICK: Ok, and just a sense of this, these new discoveries as we’ve pointed out there in the introduction, I mean we have a lot of natural gas but some of the sizes of these discoveries are substantial and they’re getting the interest of large multi-nationals as I understand it.

MALCOLME LOGIE: Absolutely, the two of the major finds in Mozambique and Tanzania are two of the world’s largest gas finds and we’re talking trillions of cubic feet of gas and that is significant for the continent.

WARREN DICK And tell us about some of the companies that are operating on the Eastern sea board. Who can we expect to find there?

MALCOLME LOGIE: Predominantly, we have large players such as Anadarko, ENI from Italy, we have Statoil coming in from Norway, Shell through the acquisition of British Gas are now also a major role player in Southern Uganda and then smaller second tier players such as Tullow Oil, Africa Oil are playing in the more Northern countries, Uganda, Ethiopia, Kenya.

WARREN DICK: And just to kind of, I mean, so there’s no shortage of funds to finance some of these projects, but just take us through what exactly we’re talking about, I think with the development of the fracking gas in the States, are we talking natural gas, are we talking fracking, are we onshore, offshore, what are the sort of the sum of the opportunities around those metrics?

MALCOLME LOGIE: Initial gas reserves on the East Coast are typically going to bE gas finds. Much as that we’ve had natural gas finds off the South African coast in the early 70’s, we’re not looking at this stage at hydraulic stimulation or fracking of these resources at the moment, but in future, you know, if resources do run out, there is a possibility of stimulating them hydraulically, breaking up the rocks to actually retrieve the last bit of gases.

WARREN DICK: Ok. So I mean in terms of some of the gas finds you’ve mentioned, these large gas finds, these have been off-shore as I understand it, so they’re literally exploring into…through the sea and the ocean and into the ocean floor and that’s where they’re finding some of these huge, I guess, spheres of gas around there.

MALCOLME LOGIE: These are deep water finds, yes, in the marine environment.
WARREN DICK: Ok, so we’ve got the basic, we’ve got the starting point that we’ve got some of these large discoveries. In your…I guess your press release or your statement, you mentioned there needs to be a substantial investment in infrastructure to unlock some of these discoveries. Can you just kind of paint us a picture of what needs to be done in that field to be able to obviously harvest the gas and then if needs be, I would imagine, most of this is going to be exported into foreign markets.

MALCOLME LOGIE: In the early stages of exploration, there’s very little infrastructure where it gets…that gets laid down, one usually operates out of existing port facilities, at least for that in the marine environment. However, once you have realised the finds, you need to monetarise them in some way and that is done through laying down pipe lines, marine pipe lines, having oil rigs on site. Then you need to move this gas from where you found it to where you want to utilise it. So that would typically require the development of suitable ports, new ports, liquid natural gas, compressing facilities which are large industrial facilities, pipe lines to support all this, and then all the ancillary infrastructure which then is necessary such as roads, power lines, any supporting industry which might be supplying a service into the larger facilities.

WARREN DICK: And as I understand there’s not much of that infrastructure at the moment so this all needs to be built and put in place in the coming years.
MALCOLME LOGIE: In the case of Mozambique and the bottom end of Tanzania we’re at the very, very initial stages of placement of infrastructure. The ports in Pemba and Palma are being developed, there’s a port being developed across in Tanzania and then again Uganda’s also making strides in terms of ensuring that they get their initial stages in terms of basic infrastructure in place to realise their oil finds in the Lake Albertine region.

WARREN DICK: We’ve got a massive energy crisis in South Africa, is there scope for much or any of this gas or this compressed natural gas to be used in the South African context?

MALCOLME LOGIE: Yes, a report was released about a week ago by a company called Frost & Sullivan who have estimated approximately 90% of the gas being retrieved out of Mozambique could end up in South Africa, either in terms of gas itself, or as power, once converted to power in Mozambique.

WARREN DICK: In terms of South Africa’s own gas finds, we’ve obviously got the issue around the shale gas in the Karoo, I think the indication or the message was that we’ve got a lot to do on the regulatory side – on the regulatory framework in order to be able to take it further and start taking the crude possibly as a serious source of energy. What needs to be done, how do we compare with these other countries that you’ve mentioned – Mozambique and Kenya in terms of where we are in the regulatory framework to unlock some of this potential?

MALCOLME LOGIE: Countries up the East Coast of Africa have been quite proactive in establishing the necessary fiscal and legal frameworks, going so far as to providing specific tax incentives to the company’s such ENI and Anadarko. South Africa perhaps were behind the eight ball on this one. We’ve had our neighbours jump ahead of us. We still haven’t had detailed clarity on onshore fracking regulations, and there are still some concerns around offshore royalties required by government. So we are out on a limb at the moment in that regard.

WARREN DICK: And in terms of defining the shale gas opportunity in the Karoo, I think you mentioned that there still needs to be quite a lot of work done around the actual – not the geological I guess framework, but the actual reserves and resource that is below the Karoo.

MALCOLME LOGIE:Yes, it’s estimated that there is approximately 3.6 trillion cubic feet of gas contained within the Karoo. That in itself is a theoretical number. To actually determine that the country needs to go ahead with exploration. It’s not as though the whole Karoo might have gas underneath it. It’s likely to be in isolated pockets in various areas.

WARREN DICK: But it’s still a large economic resource if the indications are that it comes to fruition in the kind of form that we envisage it at the moment?

MALCOLME LOGIE: Potentially there is a significant gas find in the Karoo, putting it in one of the top in the world.

WARREN DICK: Ok, now I think one of the other problems I guess or challenges that we face also being a little bit behind the curve in terms of what’s happening with our neighbours in the form of Mozambique and Tanzania, is that there is also skills shortage around being able to put these projects together, and even to finance them, as I recall one of the banks telling me that are trying to fund one of these projects, is that they actually lack the human resources so can you sketch out what it takes from that human potential and human capital side of things to be able to put this all together?

MALCOLME LOGIE: Sure – from the top end of the scale we’re looking at financiers, as you’ve just mentioned. We have very few financiers in South Africa who have a lot of experience with this type of industry and the scale of finances which move in this kind of industry. In the middle more range, or the technical range, we don’t have people who are experienced with running fracking rigs. We don’t in fact have fracking rigs in South Africa – they would have to be imported. These are highly technical vehicles with lots of computer consoles and lots of highly specialised geologists on board. Lower down in the support structures we don’t necessarily have a really, really strong basis of artisan capabilities in terms of the guys who would actually deal with the development of the infrastructures.

WARREN DICK: So quite a lot there. Are we even producing university graduates that are capable of doing geology on natural gas?

MALCOLME LOGIE: We have very fine university capabilities in South Africa, specifically when one deals with gas developments, we perhaps have a shortfall in that area and would have to lean on international experts brought in by the big oil and gas companies.

WARREN DICK: Malcolme thanks very much for your time, we’ll have to leave it there. That was Malcolme Logie, technical director for environment and energy at WSP Parsons Brinckerhoff Africa.