The Natref crude oil refinery, viewed from the Sasol One liquid fuels facility in Sasolburg on 24 February 2023. Sasol, South Africas second-biggest producer of greenhouse gases, set a target of cutting its emissions of climate-warming pollutants by 30% by 2030 and said it aims to have net-zero emissions by 2050. (Photo: Waldo Swiegers / Bloomberg via Getty Images) 
Oil exploration and production has the potential to create tens of thousands of jobs and set South Africa’s ailing economy on a trajectory of faster growth and industrialisation.
That, at least, is the assessment of a study by FTI Consulting that was commissioned by the EnerGeo Alliance, the global trade association for the energy geoscience industry.
“The establishment of a domestic oil and gas industry in South Africa presents a transformative opportunity to strengthen energy security, stimulate industrial development, create high-quality jobs and generate significant fiscal revenue,” the report says.
“The sheer scale of revenue and export earnings during the production phase presents a unique opportunity for South Africa to fund ambitious national development agendas, reduce its debt-to-GDP ratio (currently approaching 80%), and invest in critical public services like education and healthcare.”
Ross Compton, senior director of global policy at the EnerGeo Alliance, told an online media briefing last week that unlocking South Africa’s oil and gas potential could directly add one or two percentage points to gross domestic product (GDP) – material for an economy that is only expected to grow by about 1% or so this year.
“There is also the contribution of enhancing industrial growth over time,” Compton said – a spinoff that could help to reverse the current course of deindustrialisation.
South Africa has a fabulously rich resource endowment. About a third of the gold produced in history has been pried from here, and South Africa accounts for about 70% of the world’s platinum group metals (PGM) reserves, 80% of the planet’s known manganese deposits, and has abundant coal and iron ore.
But its oil and gas potential has only emerged on radar screens in a big way in the past couple of decades, with lots of hype around shale gas in the Karoo and offshore oil and gas reserves. At the same time, South Africa’s refining capacity has diminished, and oil remains crucial to the economy.
“... fuel imports have increased from 8,320 million litres in 2019 to 17,406 million litres in 2024, while crude oil imports declined sharply over this period, from 18,207 million litres in 2019 to 8,182 million litres in 2024,” the report notes.
This is because of the closure and suspension of the Enref, Sapref and PetroSA refineries at a time of rising fuel demand.
Scanning a micro lens on specific finds and projects, the report says that the offshore Block 11B/12B – the Brulpadda and Luiperd gas deposits – alone could lift South Africa’s annual GDP by almost R23-billion.
The Brulpadda and Luiperd gas projects – which French energy giant TotalEnergies pulled the plug on last year because it could not reach agree with PetroSA and Eskom on pricing, making it them commercially unviable – could boost state revenue collection by R8.6-billion annually, the report says.
The projects could also create 20,000 direct jobs while as many as 55,000 mostly unskilled jobs could be generated in the broader sector. And gas has a lower carbon footprint than coal and South Africa really needs to slash its reliance on the latter.
To illustrate the potential benefits to South Africa, the report uses the examples of Suriname in South America and Namibia and Ghana – a trio of states that have become gas and oil hotspots over the past decade and a half.
In Namibia, recent discoveries by Shell, Total and others attracted foreign direct investment of $1.8-billion between 2021 and 2023 and the projects are projected to create 12,000 jobs.
Ghana two decades ago had no oil production. But since windfall discoveries in 2007, oil now is a key lubricant of the economy, contributing 7% to GDP and accounting for 30% of export earnings.
Suriname is now literally gushing in the stuff. The oil and gas sector is expected between 2024 and 2027 to attract almost $10-billion in FDI and oil exports are expected to boost GDP by 47 percentage points – almost half – by 2029.
So the case for developing South Africa’s oil and gas sector appears on many fronts to be compelling. And while this may go against the grain of global decarbonisation efforts to arrest rapid climate change linked to fossil fuel use, one might argue that as a developing economy, South Africa should not be held to the same emissions reduction standards as, say, Norway or Japan.
It’s also true that South Africa’s slow economic growth and shocking levels of unemployment and poverty need to be urgently addressed – many would argue, with any tool that is available in the toolbox.
And financing for the fossil fuel industry is on the rise again. According to a recent report by the think-tank Green Central Banking, global financing of fossil fuel companies in 2024 posted its first annual increase since 2021.
There are investment flows sloshing around out there and South Africa will miss out if it doesn’t act now – or so goes one narrative.
Thorns among the roses
But there are many thorns in the side of this rosy narrative.
One has been the South African government’s ham-fisted approach to projects and policy – witness the Brulpadda and Luiperd debacle.
Another is the green energy transition – despite the rise in fossil fuel financing, it remains a thing – and this raises the risk that many oil and gas projects in the future could become “stranded assets”.
Then there is the stench of corruption that has long hung over the oil sector in Africa. The report’s case studies pointedly did not include Angola, Nigeria and Equatorial Guinea – petrol states where oil has often been more of a curse than a blessing, giving rise to conflict, corruption and environmental degradation on a grand scale as well as iron-fisted autocracy.
The ANC remains South Africa’s biggest political party, and its well-documented history of corruption and maladministration is surely a flashing red light. If you mix ANC politics with oil, expect the end product to reek of corruption.
There are also a host of environmental concerns. The issue of seismic surveys off the South African coast is a flashpoint of contention, though it must be said that the scientific jury remains out on its effects on marine life.
Read more: Scientific jury still out on effects of seismic surveys
But while some scientists would scoff at claims about whales and seals perishing en masse, the lack of a scientific consensus on this issue suggests it must be approached with caution.
One area where there is pretty much a scientific consensus is human-induced climate change, and the burning of fossil fuels is its main cause. The past decade was the warmest on record, and according to the World Meteorological Organization, CO2 levels in the atmosphere reached record highs in 2024.
Read more: CO2 emissions pushed to record high, raising alarm about extreme weather events - report
A burning question is: will the potential benefits to South Africa’s economy from an oil and gas boom be outweighed by its contribution to climate change? That and oil’s wretched history in Africa are worth pondering. DM