BHP set to join new oil-gas explorers in SA

BHP Billiton, the world’s biggest diversified miner, plans to drill for gas off South Africa’s west coast and will get exploration permits by August, an official said.

BHP should receive off-shore oil and gas exploration permits from South Africa by then, but it was unsure when activities would start due to a scarcity of drilling rigs, David van der Spuy, a resource evaluation manager at Petroleum Agency SA, which promotes and regulates oil and gas exploration and production in South Africa.

Africa’s largest economy is a net importer of crude and refined oil products and unlike the continent’s top oil producers Nigeria and Angola, South Africa has limited proven hydrocarbon reserves.

The permits would allow BHP to take part in exploration, currently being pursued by companies such Anglo Operations, a unit of Anglo American, and oil major Royal Dutch Shell.

Billiton owns 90% of Block 3B/4B, which Van der Spuy said had the potential for “large amounts of oil” although this remained unproven until drilled.

Under South Africa’s mining laws, the government has taken over as custodian of mineral rights, and all companies must reapply for mining and prospecting licenses. Van der Spuy said BHP was likely to be awarded the new permits soon.

“BHP Billiton holds the area on sub-lease under the previous legislation and have had to convert as have other explorers … The conversion is imminent,” Van der Spuy told Reuters.

Billiton, in partnership with South Africa’s national oil company PetroSA and Sasol, the world’s top coal-to-fuel maker, would also explore for shallow water gas in block 3A/4A.

This area is immediately south of the Ibhubesi gas field being developed by US company Forest Exploration International with production forecast by 2013.

Potential for unconventional resources
However, it was developments on land that Van der Spuy felt could hold the best chance for South Africa to significantly reduce its dependence on imported crude oil and gas.

About 40 licenses have been approved to explore for coal bed methane (CBM) — gas associated with large coal deposits and concentrated in the Mpumalanga and Gauteng areas.

“Coal bed methane is a major industry in Australia, in the US, but is unproven here. Its size in terms of gas resource is entirely unknown [in South Africa],” he said.

However, Anglo’s operations in the coal-rich Waterberg region provided positive clues, showing extractable CBM potential resources of more than one trillion cubic feet of gas.

Another alluring area of unconventional gas reserves, found mainly in the Karoo Basin, was shale gas which had helped decouple the gas price from the oil price in the United States, said Van der Spuy.

He said Shell, as well as US-based Falcon Oil and Gas, have started with a technical cooperation permit agreement which gave them a year to examine data without the need for drilling.

The two companies will submit a report early in 2011 on the area’s prospectivity, and will have first option to explore. – Reuters

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