South Africa: Exploration Plans Still On, but Light on Details

What happened: The government responded to recent criticism over delays by confirming its intention to accelerate oil and gas exploration.

Why it matters: Unfortunately for investors, the brief statement did not address their concerns; the lack of detail suggests that a considered approach is yet to be developed.

What happens next: Shale gas regulations and the updated draft IRP2025, which calls for 6,000 MW of new gas-to-power by 2030, will be released in the coming weeks.

On 15 October, the cabinet received an update on developments in the oil and gas sector, following criticism over delays at recent conferences, including Africa Energy Week in Cape Town. The update was likely led by Minister of Mineral and Petroleum Resources Gwede Mantashe, who has regularly blamed “foreign-funded NGOs” for the delays due to their appeals against environmental authorizations and court challenges.

In a brief statement, the government confirmed that it aims to accelerate both onshore and offshore exploration to see the full potential of its oil and gas resources. It also announced that Minister of Forestry, Fisheries and the Environment Dion George will publish the finalized Shale Gas Regulations, which will allow Mantashe to lift the moratorium that has been in place since 2014.

However, it did not provide much detail on those plans and offered nothing substantive to address the regulatory challenges facing the sector. This suggests that the government is yet to develop a considered approach to making progress on those issues.

The lifting of restrictions on shale gas development will be controversial and attract new scrutiny of onshore exploration plans. Moves toward shale gas exploration in the 2010s saw strong opposition backed by Johann Rupert, the chairman of luxury goods company Richemont.

Meanwhile, the cabinet announced the approval of the final draft Integrated Resource Plan for Electricity (IRP2025), which outlines the expected generation mix to 2040. An initial draft was presented in November 2024; the latest revisions have fallen to Minister of Electricity and Energy Kgosientsho Ramokgopa.

Judging from Ramokgopa’s 19 October presentation, however, the updated draft is underwhelming in terms of providing a clear direction for the energy sector. Although it offers positive headlines such as opportunities for new gas developments, Ramokgopa skirted around the cost comparison of different technologies.

IRP2025 also promotes the untested “clean coal” potential and pushes new nuclear power, which is unrealistic in South Africa due to the high cost burden. This will leave the plan exposed to accusations from rival technologies and NGOs that the IRP2025’s “political adjustments” are irrational and open to review.

The relevance of the plan's approach is also increasingly questionable as the unbundling of Eskom continues and trading markets are introduced. Ramokgopa failed to address this issue, but his claim that the state will lead rather than follow the market will be severely tested, especially given the country’s current budget constraints.

The direction for industry is positive, with 6,000 MW of new gas-to-power required by 2030 to support almost 20,000 MW of new renewable energy. This is based on a minimum load factor of 50%, which will support gas-to-power as an anchor for wider gas requirements. The gas-to-power requirement by 2039 is 16,000MW.

Still, further resistance to gas-to-power projects from community groups and NGOs will likely constrain and delay project developments, which, along with the long lead times for gas turbines, makes the 2030 timeframe appear overly optimistic.