The sharp decline in oil prices over the last year has resulted in questions being raised about the wisdom of South Africa’s aspiration to pursue an aggressive roll-out of an oil services hub in Saldanha Bay, in the Western Cape.
Prior to the decline, there was widespread support for the concept, owing to the rapid growth of upstream exploration and development in West Africa, which resulted in increasing demand for dedicated oil and gas services and a marine repair hub. In fact, a report published by the Saldanha Bay Industrial Development Zone (SBIDZ) Licensing Company last year estimated that Africa has produced around eight-million barrels of crude oil a day, or about 10% of global production. Against that background, demand for offshore oil and gas platforms and components and repair services is perceived to be strong and growing. South Africa, particularly the Port of Saldanha Bay, is viewed as geographically well positioned to service the oil and gas sector.
But in light of a lower-for-longer oil price outlook, what are the current prospects for attracting investment into the SBIDZ? SBIDZ Licensing Company business development executive Laura Peinke acknowledges that the decreasing oil price has definitely had an impact on exploration and production activities. But she does not expect the cyclical development to deter investors, who are still showing interest in the SBIDZ as a long-term hub for upstream oil and gas services, marine repair and fabrication. Peinke notes that the majority of investors focus on the marine and subsea engineering and fabrication industries and that these companies have significant order books. Government Backing In addition, the SBIDZ has strong government backing, with the Department of Trade and Industry (DTI) an important champion of the SBIDZ and serious public- sector commitments to developing the infrastructure required to encourage private investment.
Commitment from government to unlock the multibillion-rand potential of South Africa’s oceans is driven by the large-scale initiative, Operation Phakisa, which was officially launched in October last year. It is designed to fast-track the implementation of critical development issues more effectively, such as South Africa’s ocean economy. Operation Phakisa prioritises new, dedicated infrastructure in the Port of Saldanha Bay and is being rolled out by State-owned Transnet group through Transnet National Ports Authority (TNPA,) which is working closely with the SBIDZ to ensure that the infrastructure tenders are put out to the market this year.
“While the current economic climate in the oil and gas sector might not be conducive for embarking on new exploration projects, one has to be mindful that the bulk of existing offshore production remains operational and demand for support for these operations will continue,” TNPA port manager Willem Roux says, adding that these services include repairs and maintenance.
He notes that the lull in exploration activities might provide an opportunity for repair and maintenance work on exploration vessels and equipment. Roux further states that fleet owners have shown keen interest in establishing a base with dedicated and purpose-built infrastructure for their vessels at the Port of Saldanha Bay.
“This interest is grounded in the location of the port, existing logistics chains and the ease of doing business. Undeveloped land and sea areas provide the opportunity to develop quay, back-of-quay and back-of-port facilities that are in close proximity to major exploration and production activities,” he explains.
More than 26 companies active in the logistics, support services, oil and gas contracting and drilling, marine and rig building, and fabrication and repair, as well as specialist industries, had shown interest in relocating their businesses to the SBIDZ, with eight of these firms developing and finalising agreements with the zone operator.
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