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October 14, 2021

Eni to terminate oil exploration plan in South Africa amid tech challenges

The move comes in the wake of delays in passing draft oil exploration and production law by the country.

By Archana Rani

Italy’s Eni is reportedly planning to withdraw from plans for oil exploration with Sasol in the exploration right permit 236 (ER236) offshore South Africa, citing technical challenges.

The move by the Italian energy firm comes following concerns over the technical difficulties related to drilling for hydrocarbons in waters ranging between 1km-3km, reported Bloomberg citing two people familiar with the decision.

Eni’s exit plan is also triggered by delays from the government to implement the Upstream Petroleum Resources Development Bill, which was approved by the cabinet earlier this year.

The law, which would take at least another year to pass, is aimed at regulating the country’s oil and gas industry, according to the publication.

In 2019 and 2020, Total made new offshore gas discoveries in block 11B/12B, making a new petroleum province in the country.

Moreover, the new upstream petroleum bill calls for the state to acquire a 20% stake in oil and gas exploration and production ventures.

Sasol secured the exploration rights from the Petroleum Agency of South Africa for the block in 2013.

In 2014, Eni acquired a 40% stake and operatorship in exploration permit ER236 from Sasol.

The permit allows for hydrocarbons exploration on an 82,000km² area along South Africa’s east coast in the Durban and Zululand basins offshore Kwazulu-Natal province.

Earlier this year, Reuters reported that Total will delay application for drilling work at the block 11B/12B offshore South Africa.

South Africa is seeking to reduce its dependence on coal to produce power. The country produces more than 80% of its total power from coal-fired plants.

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