Gwede Mantashe shuts down Russia talk around TotalEnergies withdrawal

Mineral and petroleum resources minister Gwede Mantashe has told parliament TotalEnergies’ withdrawal from offshore blocks off South Africa's southern coast was not the end of exploration there and Gazprom’s removal from exploration will be based on practicality, not ideology.

Briefing parliament’s portfolio committee on mineral and petroleum resources on Tuesday, the minister said TotalEnergies’ decision to exit the operation came from commercial considerations. He expressed confidence that other companies would emerge to pick up where TotalEnergies left off.

DA MP James Lorimer challenged Mantashe’s response to TotalEnergies’ withdrawal as spin, saying he was told it underscored a disaster due to the economic implications and the involvement of Gazprom from a sanctioned Russia.

In response, Mantashe said the government of national unity was working effectively and a few ministers in the cabinet were having a “Damascus moment”, hinting being at the helm of government removed whatever ideological notions they previously had about Russia.

“It is important for us to have a state visit to Russia so we understand the reality rather than be led by our ideological views on them. On whether involving a country such as Russia is a risk, we are a member of Brics. We cannot take a harsh position on a country such as Russia because the West is hostile to them,” he said.

The energy giant announced in late July it had entered into Block 11B/12B in 2013 and made two gas discoveries, Brulpadda and Luiperd, but they could not be turned into a commercial development as it was too challenging to economically develop and monetise these gas discoveries for the South African market.

Mantashe said despite concern about TotalEnergies’ withdrawal, he was more interested in the prospects that remained in the area and who would continue operations.

The minister told MPs companies remained interested in exploration in the block and around the country.

“When a big investor withdraws, the loudest noise is about the withdrawal. People never talk about the prospects. Let me give you an example. Anglo withdrew from coal mining. Out of that, two companies emerged, one was Seriti and the other was Thungela.”

Petroleum Agency South Africa COO Bongani Sayidini said while the company had demonstrated they were able to operate in the environment, the development costs in the area were high and the pricing fundamentals were not aligned enough for TotalEnergies to continue operating.

“The main reason is commercial considerations on the part of TotalEnergies. Commercial considerations in the sense that they needed a firm offtake agreement which would largely be influenced by the gas price,” he said.

“They would have wanted a gas price that makes sense for them. Any off-taker would also need to make sure their operations are commercially viable. So you are not going to take an operation where the gas price is not viable.”

He said while there was a slight delay, the agency expected a high level of interest in continued operation in the area from the market. When TotalEnergies made the Brulpadda find they were targeting oil, not gas.

Despite TotalEnergies’ withdrawal, ExxonMobil and Shell were interested in oil and gas finds in South Africa and the region. The agency was optimistic that companies in the market were eager to pick up where TotalEnergies left off, he said.

Mantashe said TotalEnergies’ exit from the southern coast operation should not be construed as similar to the withdrawal of Shell, which is exiting the South African market.

“The Shell process, of who takes over from Shell, is at the tail end. We will brief the committee. The same thing with Total. I am not looking at the withdrawal, I am looking at the prospect.”

Mantashe stressed TotalEnergies was not leaving South Africa. They are merely leaving a difficult deposit in favour of easier investment as the Agulhas current is difficult to navigate and requires highly specialised exploration skills, he said.

Business Times