RUTHFULLY YOURS

While many of the world’s industrial powers are looking for ways to reduce their consumption of fossil fuels, a fabulous oil discovery off the coast of South Africa promises to alter the energy future of the continent.

French state oil company Total led a consortium of companies that had been exploring off the coast of South Africa for several years.  Their find has excited the entire oil industry and promises to further reduce the influence of OPEC and other big energy-producers.

ZeroHedge:

“With this discovery, Total has opened a new world-class gas and oil play and is well positioned to test several follow-on prospects on the same block,” said Kevin McLachlan, Senior Vice President Exploration at Total.

According to Total’s chief executive Patrick Pouyanne, the discovery could hold 1 billion barrels of oil equivalent of gas and condensate resources.

South Africa still imports much of its oil and gas, which makes this one find a potential game-changer for them.

South Africa is currently working on new legislation that would separate the conditions for exploring and exploiting oil and gas resources from those for traditional minerals.

Commenting on Total’s discovery, Andrew Latham, vice president, global exploration at natural resources consultancy Wood Mackenzie, said:

“Even though the well isn’t an oil discovery, if Brulpadda proves to be anywhere near as big as the estimates of up to 1 billion barrels of oil equivalent resources, it will still be a game-changer for South Africa.”

There are several problems with exploiting this find.  Just because their country has made this discovery doesn’t mean it can be developed adequately.  The political situation in South Africa is deteriorating as the country’s far-left-wing government has begun an expropriation of white-owned land.  Such expropriations will force international players to think twice about investing the huge resources necessary to exploit the find.

There might even be sanctions imposed on the country if the land grab goes as many observers expect: badly.  While the bonanza is real, foreign investors may be skittish about participating in the oil rush.

Is the radical left government of South Africa smart enough to bend its economic principles to allow for the proper exploitation of this resource?  That’s another unanswered question.  The track record of left-wing governments who run big oil industries is not good.  See Venezuela.

For those who think this is a catastrophe for planet Earth, relax.  There is no more efficient energy source than fossil fuels, in that the creation of energy using coal, gas, and oil is far more productive and cheaper than solar or wind power.  For that reason, fossil fuels will be the major option to produce electricity and power vehicles and industry for the foreseeable future.