• Sea change

    The offshore oil and gas industry is looking forward to an uptick in business, which is good news for projects up and down Africa’s west coast

    Sea change

    The 2014 collapse in the oil price was a setback for plans to develop service-and-repair facilities in South Africa on the basis of the region’s oil and gas activities. Projects, such as the development of the three major elements of Saldanha Bay’s maritime service-and-repair facility have slowed down. But in 2019 activity is increasing off Angola and the Gulf of Guinea, and the work done over the past five years should start to bear fruit. The recent Brulpadda gas discoveries off the southern Cape should provide further stimulus.

    The closest major oilfields, in Angola, were especially affected by the decline. According to oilfields consultants Baker Hughes, the number of rigs in Angolan waters declined from 18 in early 2014 to two in 2017. Bloomberg reports that exploration activity had fallen to a single rig in early 2018. In March 2019 this had recovered to seven. These were joined by another rig in April when the oil major Chevron brought a rig owned by Malaysia’s Sapura Drilling into position off Cabinda.

    ‘We are committed to maintaining a certain balance of our production, in creating the environment so that there is more investment in Angola – essentially in exploration,’ Angola’s Oil Minister Diamantino Azevedo said in December. By April this year he was able to add: ‘International oil companies are carrying out efforts to increase oil production. They’ve invested in the recovery of active fields and in the development of new exploration and production projects.’

    Saldanha Bay’s oil and gas hub may be an incidental beneficiary. A joint programme of the Western Cape government’s Department of Economic Development and South African national government’s Department of Trade and Industry, the project is managed by the Saldanha Bay industrial development zone, which co-operates with the Transnet Port Authority (TNPA) in priority projects in oil and gas, and maritime engineering and services, with the intention of making rig maintenance and repair a core focus of the development.

    The project economics certainly add up from a rig operator’s perspective. Searching for oil and gas is an expensive activity. It costs about half-a-million US dollars a day (although the price depends on demand) to hire a deepwater rig plus another US$20 000/day for its two or three supply vessels.

    However, it takes 100 days to tow a rig from the West African oilfields to the huge repair facilities in Singapore, a total downtime cost of US$50 million. The locational advantages of Saldanha Bay for Angolan and Gulf of Guinea operators thus speak for themselves.

    There are three major components to the Saldanha Bay oil and gas development. First, construction and civil engineering firm Basil Read is working on the extension of TNPA’s general maintenance quay to create an offshore supply base (OSB). The OSB will provide marine bunker services, lubricants and freshwater as well as the fabrication of offshore structures in the piping and pipeline space. A management concession for the facility was signed in April 2018 between TNPA and purpose-built private-sector operator Saldehco, and the engineering has been substantially completed.

    The other two projects are a planned specialised rig and vessel repair quay called Berth 205 and the 1 000m-long Mossgas jetty designed to serve several ships or rigs in need of repairs at the same time. However, when the first round of expressions of interest for these projects closed in 2016, no clear bidders had emerged, says TNPA. ‘There has been no demand for rig repair [at Berth 205] due to cutbacks in the oil exploration market,’ the state-owned transport utility said at the time.

    Saldanha Bay certainly has a number of factors on its side. It is the largest and deepest natural port in the southern hemisphere and is perfectly located. But against it has been the slowing of the industry and the fact that it has to be seen to be competing, to a degree, with the port of Cape Town, only 60 nautical miles to the south.

    However, Saldanha is also one the world’s largest oil storage hubs with facilities to store 45 million barrels. The initial facility was built by the apartheid state for strategic reasons. Currently, a project to add 12 blending tanks is under construction by Oiltanking MOGS Saldanha, a consortium of a local company and Hamburg-based firm Oiltanking.

    The facility generated a lot of interest a few years ago when the oil market was in contango – a term that means futures prices are higher than near-term contracts. The function of a facility such as Saldanha Bay is then to store crude with the aim of selling it later at higher prices. It was reported in March last year that the market had switched and that the Saldanha Bay tanks had been drained and sold into the international oil market. The facility exported 18 million barrels in 2017.

    A storage facility on this scale means tanker traffic, which can only boost the prospects for the repair and maintenance industry. Indeed, Saldanha Bay is known for emergency repairs to large vessels. In November last year the 291m-long liquefied natural gas (LNG) carrier Methane Mickie Harper (86 000 tons), owned by UK-based Methane Services, docked for critical repairs.

    An improvement in the exploration and development arena represents opportunities in areas such as rig maintenance and repair

    Methane Mickie Harper’s owners chose Saldanha due to its water depth and sheltered inner anchorage, which allows for diving even in adverse weather conditions. While docked, intermediate surveys and underwater inspections were carried out, supplies replenished and the crew changed.

    The ship was the third large LNG carrier to dock in Saldanha Bay since 2015 and is an indication of things to come.

    Saldanha port manager Vernal Jones says that ‘the geographic positioning of Saldanha bodes well for vessels transiting the West Coast area. At the same time, we are in the midst of a period of major expansion within the oil and gas sector, among others, [and] it is encouraging that international partners see Saldanha as the port of choice to undertake repairs for their LNG vessels’.

    The natural gas strike by oil major Total at the ultra-deep Brulpadda well 175 km south of Mossel Bay, announced in February, is likely to lead to more traffic in rigs and drill ships around the South African coastline. This will not only involve Total, whose specialist rig the Deepsea Stavanger hit a ‘layer of condensate’ during the December/January weather window, but also the owners of neighbouring concessions.

    Total has announced that the Deepsea Stavanger will return in December 2019 to drill three more holes, one of which will be an appraisal hole. This will allow collection of data on flow rate and calorific values to feed into a final investment decision.

    Wits University academics Robert Scholes and Rod Crompton comment that there is a great deal of work still to be done before the value of the strike can be assessed. They point out that the size of the strike announced by Total (1 billion barrels) is ‘modest’.

    They argue that ‘it’s too early for South Africa to be counting its chickens. It takes years to develop a gas field to the point where it is producing gas. Many things can change in that period. The Brulpadda find is at great depth, both below the sea surface and below the sea floor. It will be challenging to develop in an area notorious for high winds and heavy seas’.

    So far the logistics support for Total’s work has been provided largely from TNPA’s smallest commercial harbour, Mossel Bay. The port has been more than adequate for local logistics and marine services such as piloting, berthing the three supply vessels and traffic control. But if the anticipated exploration surge actually happens in the area, work in related areas – including rig maintenance and repair – is likely to have to spread more widely.

    This, combined with Angolan revival, is the development that will provide Saldanha Bay with its chance.

    Development may have lagged in recent years because of poor market conditions but opportunity is now on the horizon. If Saldanha is to move beyond logistics support and crew rotation, the current main activities regarding rigs, the time may well be ripe for TNPA to make some progress on outstanding investment decisions on Berth 205 and the Mossgas jetty.

    Some fast footwork is needed, however, as there are rivals jockeying for position, notably Luanda and Walvis Bay.

    By David Christianson
    Images: Patrick King Photography