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An early production system (EPS) via the PetroSA operated gas
processing facility in Block 9 is a unique opportunity for
TotalEnergies to accelerate first production from its deepwater
Luiperd discovery and for South Africa to support and further
progress its energy transition plans. A start-up by 2027 is still
feasible considering the minimal infrastructure upgrade required
which is further supported by healthy economics and break-even
prices estimated at less than 1.9 USD/bbl. The project can play a
key role in the country's plan for energy transition and moving out
of coal produced energy. In 2020, the main gas source for the
country was the declining gas imports from Mozambique and the
remaining domestic gas production. With the majority of the oil and
gas fields being at a very mature stage and the domestic gas
production all but suspended, LNG imports as well as the Luiperd
and Brulpadda reserves will be critical for meeting the increased
future energy demand as well as the country's energy transition
plan.
Near-field gas processing facilities offer unique
opportunity for TotalEnergies
TotalEnergies' recent exploration campaign in South Africa has
yielded significant discoveries and has renewed interest in the
region. Luiperd and Brulpadda fields are estimated to hold
recoverable resources in excess of 5 Tscf of gas, some of which
could be brought into production within the next few years. The
Luiperd field can be developed through an early production system
possibly via the existing F-A platform with a minimal number of
wells, while no further details about the full field development
have been announced. IHS Markit believes that a viable development
approach would be to first focus on the low-risk volumes as a proof
of concept in terms of field deliverability and associated volumes
before additional processing capacity is added downstream. The
suggested development plan involves the drilling of two production
wells, the installation of a subsea production system tied into the
North Tie-in Facility (NTIF), 38km to the northwest of the F-O
(Ikhwezi) facility.
Figure 1: Block B11/12B proposed development
strategy
By utilizing the existing infrastructure, TotalEnergies and
partners can minimize development costs and fast track production.
The minimal additional infrastructure required is: the suggested
well cluster, a 70 km pipeline to the F-O NTIF and an additional
pipeline from the NTIF to the F-A Platform. This is expected to
cost around 900 MM USD based on IHS Markit Que$tor.
The possible synergy between TotalEnergies and partners with
PetroSA, holds the benefit that a downstream market for 200 MMscf/d
has already been established in the GTL facility, and the F-A
Platform facility design caters for sufficient capacity to process
the forecasted gas and condensate from the Luiperd fields - hence
deferring abandonment of the Block 9 infrastructure. The F-A
Platform and GTL plant, which has been under care and maintenance
since 2020, can be restarted even though the maximum available
Block 9 production is below the current equipment minimum
turndown.
Development concept for remainder of Luiperd and
Brulpadda's recoverable resources
The Luiperd Phase 1 development leads to the monetization of the
asset and facilitates further development, including exploration
and appraisal drilling. Phase 1 also serves as proof of the
potential from the Luiperd reservoir, after which the remaining 60%
of recoverable resources from Luiperd can be utilized in a second
phase, with additional wells being drilled to increase the plateau
rate and an investment to increase in downstream processing up to
350 MMscf/d. The Luiperd Phase 2 development maintains the 350
MMscf/d production plateau until 2054, after which the Brulpadda
field development could sustain the plateau for an additional 12
years until 2066. This is to be utilized in the GTL facility as
well as additional gas power plants.
Figure 2: Luiperd/Brulpadda full field development
South Africa is going through an energy transition out of coal
power dependence, where gas is seen as a transition fuel, but
developing gas infrastructure and supply will play a key role in
ensuring a smooth transition while meeting the future energy needs
of the country. (For further information, please see earlier blog
post: Prospects for gas in South Africa
and Nigeria Power Sectors). With a successful Phase 1
development, local industry investment and policy changes could be
fast-tracked to aid in the power transition. Phase 2 and 3 could
also potentially be moved to an earlier date and an increased
plateau, based on the availability of additional gas-to-power
infrastructure.
Robust economics underline the investment opportunity,
but key uncertainties remain
Although the petroleum agreement for Block 11B/12B is not
publicly available there is little uncertainty around the fiscal
terms which are well understood from national legislation. The
fiscal regime consists of royalty and corporate income tax. Royalty
is due at a rate between 0.5% and 5% of gross production linked to
earnings before interest and tax (EBIT) and corporate income tax is
levied at a rate of 28% of gross revenue less deductions and
depreciation. Further to this, IHS Markit has assumed 10% state
participation in the project carried to commercial discovery
without repayment, and a nominal fee of USD 50,000 per year for the
training of personnel.
Figure 3: Assumed Gas Price Indexation
With offtake agreements yet to be negotiated there remains
significant uncertainty around the product pricing. IHS Markit
assumes that gas price agreements will be indexed to Brent directly
or through refined products and so has chosen to link the gas price
via a percentage slope to oil for an economic evaluation. An 8%
slope has been used which gives a realized gas price of USD
5.68/Mcf in a USD 67/bbl oil scenario.
The economic evaluation metrics for the phase 1 Luiperd project
describe an attractive investment opportunity with a healthy Net
present value (NPV) of USDMM 2775, an eye-catching Internal Rate of
Return(IRR) of 34%, and a payback period of six years. The
economics of the recovery project benefits from a globally
competitive fiscal regime with a government take of 31%; including
an assumed 10% state back in takes place, the overall state take
would be 38%. Breakeven analysis shows the project breaks even in
a
Figure 4: Economic evaluation metrics for phase 1 Luiperd
project
Luiperd Phase 1 sensitivities highlight the risk
surrounding key uncertainties
Sensitivity analysis focusing on Luiperd phase 1 shows the
project is resilient to changes in project costs aided by a fiscal
regime that collects the majority of economic rent through
income-based taxation post cost. Price and production seem
particularly important drivers of value which underlines the risk
surrounding the key uncertainties present in this evaluation and
which must be de-risked to progress this project toward a
commercial investment decision.
Figure 5: Sensitivity analysis for Luiperd phase 1
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