South Africa’s national oil and gas landscape is set for a significant shift as the state-owned Petroleum Oil and Gas Corporation of South Africa (PetroSA) has approved a major farm-in deal granting Shell Offshore Inc. a 60% stake in the country’s offshore Block 2C. The decision, captured in an internal document seen by Reuters, marks one of the country’s most important upstream developments in recent years—positioning South Africa more strategically within the fast-rising Orange Basin exploration zone.
The Orange Basin, spanning waters off South Africa and Namibia, has become one of the world’s most sought-after oil frontiers following historic discoveries in Namibia by supermajors such as TotalEnergies and Shell itself. These discoveries have triggered a renewed rush for acreage, investment, and partnerships across the region, with global energy players making bold moves to secure early positions.
The approval from PetroSA hands Shell a controlling 60% interest in Block 2C, while PetroSA will retain 40% pending the completion of the agreement. According to the internal document, Shell has agreed to a $25 million signing bonus and a full cost carry estimated between $135 million and $150 million to fund the drilling of three exploratory wells. This level of investment underscores the energy giant’s growing confidence in the geological potential of South Africa’s offshore territories.
Despite the magnitude of the development, PetroSA’s leadership has not publicly commented. Requests for comment from the corporation’s chief executive were not immediately returned. Shell, meanwhile, maintained its standard position on sensitive commercial negotiations. A spokesperson said the company could not comment on specific opportunities due to commercial sensitivities but noted that Shell “continuously evaluates portfolio options to grow its business.”
Shell’s Expanding Presence Along South Africa’s West Coast
The farm-in approval adds to Shell’s widening exploration footprint along South Africa’s west coast. The company, which is already active in several offshore blocks, has been steadily strengthening its stake in one of the continent’s most promising frontier basins.
In July, Shell received environmental authorisation to drill up to five deep-water wells in the Northern Cape Ultra Deep Block, also located in the Orange Basin. Although the company has not publicly confirmed timelines for drilling, industry experts believe Shell is positioning itself to capitalise on a basin that could mirror Namibia’s recent success.
The growing interest in South Africa’s offshore resources has not come without challenges. Shell’s exploration plans in the west coast’s Block 5/6/7 were halted by a high court decision after complaints from environmental advocacy groups. In response, Shell filed an appeal in October, arguing that due process was followed and that offshore exploration is vital for energy security and economic development in the country. The legal battle remains ongoing.
Regulatory and Environmental Dynamics
The South African regulatory environment around offshore exploration continues to evolve as the country balances environmental concerns with urgent economic needs. The Petroleum Agency of South Africa (PASA), the national regulator overseeing exploration rights, responded cautiously to news of the farm-in approval. PASA noted that it had not yet received a formal application to transfer interests related to Block 2C and therefore could not offer substantive comment.
Environmental groups have consistently raised alarm over offshore activities, citing risks to marine ecosystems, fishing livelihoods, and coastal communities. However, government officials insist that responsible exploration could play a transformative role in stabilising the country’s energy sector, boosting revenue, and creating employment opportunities.
Shell’s exploration activities have been particularly contentious, drawing protests from coastal communities and civil society activists. Yet despite legal hurdles, the multinational has remained firm in its commitment to exploring South Africa’s deep-water potential.
PetroSA’s Strategic Realignment
The development also comes at a pivotal moment for PetroSA, which this year was incorporated into the newly formed South African National Petroleum Company. This restructuring aims to consolidate national energy assets under a single umbrella, improve operational efficiency, and position the state for greater participation in the global oil and gas sector.
PetroSA holds a significant portfolio, including both onshore and offshore assets, as well as the gas-to-liquid (GTL) refinery in Mossel Bay. Once a major contributor to South Africa’s energy mix, the Mossel Bay plant is currently under care and maintenance due to feedstock shortages. A successful revival of offshore production through ventures like Block 2C could reopen pathways for resuming operations at the GTL facility and boosting domestic fuel output.
Analysts say the Shell farm-in deal could provide PetroSA with the financial flexibility and technical partnership it urgently needs. With state finances under pressure and South Africa facing persistent energy insecurity, cooperation with international oil majors may offer a pragmatic route to unlocking offshore resources.
A Boost for South Africa’s Energy Ambitions
If the exploration wells funded by Shell yield commercially viable discoveries, Block 2C could significantly bolster South Africa’s domestic oil and gas reserves. Such progress would be crucial as the country seeks to diversify its energy portfolio, reduce reliance on imports, and expand investment into the upstream sector.
Energy economists also highlight the potential for broader economic benefits, including job creation, skill development, and opportunities for local service providers in the oil and gas value chain. With global energy markets undergoing rapid transformation, South Africa’s positioning within emerging offshore basins could shape its long-term economic trajectory.
What Happens Next?
The next steps hinge on regulatory approvals, environmental compliance processes, and Shell’s internal decision-making. The transfer of the 60% interest will need to be formally submitted to PASA, after which the agency will conduct a technical and legal evaluation. Once approved, Shell will proceed with planning for the three committed wells, a process that includes rig contracting, seismic data analysis, environmental mitigation strategies, and operational logistics.
While timelines remain uncertain, industry watchers expect accelerated activity in 2025 as energy companies race to secure strategic positions across the Orange Basin.
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