The future world-class Oil & Gas Centre at Saldanha Bay in the Western Cape of SA, which will be established as a free port, is driven by strong private sector investor demand and political will.
From a South African National Strategy point of view, the concept embraces the IPAP2 focusing on the upstream Oil & Gas Services industry, and providing strong new opportunities for the ship building and metal fabrication sectors.
“We have seen buy-in from many entities, including great vision from TNPA who see the potential for using their resources to economically contribute to the national imperative in this specific way,” stated Frost & Sullivan’s Head of Public Sector Growth Solutions, Adri Grobler.
“The Centre is unlikely to cannibalise other neighbouring ports, but would rather increase the share of O&G services (logistics, repair and fabrication) performed in the region.”
Strong collaboration between the multitude of stakeholders involved - including the National Ports Authority, Saldanha Bay Municipality, IDC, and provincial government - will ensure that the Centre offers investors a one-stop-shop offering through streamlined processes that reduce cost and time related to business set-up and operations, as well as enhance general ease of doing business.
This should include access to suitable land, utilities and ICT infrastructure, assistance with construction permits and visas for foreign workers, as well as assistance with critical skills training needed for the local workforce.
The DTI and National Treasury are likely to support this initiative by declaring the port and back-of port area an Industrial Development Zone (IDZ) or Special Economic Zone (SEZ). Under the blanket of an IDZ, investors can expect fast tracked customs clearance, as well as significant tax breaks, including import and export duties and Value Added Tax (VAT), she noted.
The West and Southern African oil and gas industries (including those of Nigeria, Gabon, Côte d’Ivoire, Congo, Cameroon, Ghana, Equatorial Guinea and Angola) are amongst the world’s fastest growing. In addition, with new and significant discoveries being made on an on-going basis off Mozambican, Tanzanian and Namibian shores, sub-Saharan Africa is set to enjoy a prolonged period of growth in oil and gas activity.
In 2011 oil production was somewhat lower than what the straight-line trend would have predicted. This is largely attributable to reduced production from the Northern region caused by the Arab Spring – most notably in Libya. And, while North African oil production recovered in 2012, Frost & Sullivan expects a larger contribution from the Western and Southern regions as they continue to mature and as new discoveries are made.
The West’s contribution to African O&G production is expected to increase from 33% in 2007 to 39% in 2016 and the Southern’s from 18% to 24%, while the North African contribution is expected to decrease from 43% in 2007 to 31% 2016. The CAGR for West Africa oil production from 2007 to 2016 is estimated at 4.7% and, for Southern Africa, 6.4%.
As far as gas production is concerned, North Africa will continue to be the largest producer in Africa with more than three quarters of continental production maintained from 2007 to 2016. However, the large discoveries of gas off the coast of Mozambique and the continued discoveries off of Tanzania are expected to cause a significant shift in this dynamic over the long-term.
The number of rigs off West Africa increased from 63 to 72, within one year, from October 2010. In that period, rig utilisation rates increased from 71% to nearly 81%; further evidence of increasing activity (albeit only over the short-term). It is estimated that the total number of rigs off the western African coastline (including Angola) is between 80 and 100 at present, expected to increase to between 100 and 120 by 2016.
In April this year, there were 4 known rigs off the eastern coast of Africa. This brings the (conservative) total number of rigs operating off of sub-Saharan Africa’s coast line, to 84. In addition, each year a significant number of rigs move past the Cape of Good Hope en-route to a new operational location, seeking maintenance and repair services, or newly manufactured rigs relocated to their initial production location. The number of these passing rigs was estimated to total 120 in 2011.
While ports in Nigeria, Namibia, Ghana, Gabon, Mozambique and Tanzania offer components of infrastructure and services necessary for the off-shore oil and gas industry, there is limited structure and coordination from these ports in providing a holistic and efficient offering.
According to Grobler, “Saldanha Bay, with its deep natural port, existing infrastructure, portside land available for development, close proximity to the marine industrial backbone of Cape Town, and central geographic location to supply operational nodes along both the east and west coast of Africa, is ideally positioned as the world class Oil & Gas Centre the offshore O&G industry desperately needs.”
End-users in the oil and gas industry (drilling companies, petroleum companies and oilfield service companies) are highly sensitive to the quality of products and services, and the speed and reliability of delivery; while cost remains a hygiene factor. The IDZ will attract and support local and international investors, and industry participants, who can efficiently deliver the required quality of products and services required by end-users. From a supply perspective, Saldanha Bay is set to become the main hub; while Luanda, Onne, Port Gentil, Pembe and other ports will serve as the operational nodes in the supply chain.
The Saldanha Bay Oil & Gas Centre will develop into a hub with clusters of companies servicing each other, as well as end-users in diverse yet accompanying ways.
This type of Centre offers opportunities for a multitude of local and international companies, including property developers, logistics, oilfield service providers, petroleum companies, drilling companies, original equipment manufacturers, rig / ship repair contractors (and subcontractors), manufacturers of oilfield chemicals, and even rig / ship recyclers.
In addition, a host of complementary and supplementary services will be required, including knowledge workers (EPCs, consultants); legal; ICT; fuel bunkering services; petrol fuel stations; private security companies; food and retail; hospitality; waste disposal services; medical; diving services; and potentially Independent Power Producers (IPPs).
“The positive potential socio-economic impact of such a Centre on Saldanha Bay and the district is enormous,” reiterated Grobler, “and local inhabitants would do well to reap the potential benefits by either joining upcoming training programmes or embrace the many opportunities for SMME’s.”
