New PetroSA deal sees Shell tightening its grip on Orange Basin

Image credit: Reuters/May James

If successfully concluded, the agreement will strengthen oil major Shell's exposure to the Orange Basin, which has become one of the world's most coveted exploration zones after major oil discoveries in neighbouring Namibia.

A short note under PetroSA's priority programmes said the company had approved the farm-in deal, allowing Shell Offshore to take a 60% interest "with Shell committing a $25m signing bonus and full cost carry (of around $135-$150m) for three wells".

The chief executive at PetroSA, which holds 100% of Block 2C, pending the deal, did not immediately respond to a request for comment.

A Shell spokesperson said commercial sensitivities prevented any comment on "specific opportunities", but added the company was "continuously evaluating various portfolio options to grow our business".

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Shell already has drilling plans

Shell is already aiming to explore along South Africa's west coast and in July was granted environmental authorisation to drill up to five deep-water wells in the Northern Cape Ultra Deep Block in the Orange Basin.

It has not been said when any drilling will begin.

In October, Shell applied to appeal a high court decision blocking exploration in the west coast offshore Block 5/6/7, as several court cases brought by environmental groups delay planned drilling.

PetroSA, which this year was incorporated into the new South African National Petroleum Company, holds many assets, including offshore acreage and a gas-to-liquid plant at Mossel Bay in the Western Cape, which is under care and maintenance.

National regulator PASA said it cannot comment on the stake transfer as it has yet to receive an application to transfer interests on existing rights in Block 2C.