'SA could be big oil producer'

Cape Town - South Africa has the potential to become a more significant oil and gas producer, with a new petroleum act paving the way for more exploration, an official at the Petroleum Agency of South Africa said on Friday.

David van der Spuy, the agency's manager for resource evaluation, said companies active in the country have resumed exploration put on hold during the changes in the law and other companies have come in to secure blocks both on and offshore.

The new law ensures that historically disadvantaged South Africans can participate in the sector.

The agency, which regulates the country's exploration on behalf of the government, on Thursday awarded the exploration licences for two of South Africa's offshore areas to oil major Shell and Singapore's Silver Wave Energy.

"There are still some large areas that are unexplored in South Africa, including far offshore areas ... in terms of geology, there is a possibility of larger amounts of oil," van der Spuy told Reuters on the sidelines of an oil conference.

He said the southern Outeniqua basin, currently explored by Canadian Natural Resources, had potential for large oil accumulation, as well as the deeper part of the Orange basin, off the west coast, where BHP Billiton and Shell are active.

Van der Spuy said new substantial gas discoveries were also possible, adding that geological structures were located that were similar to the vast gas deposits found in the Kudu field off the coast in Namibia.

The authority awarded a production licence to US gas explorer Forest Exploration International to start producing gas from its Ibhubesi project off the west coast of South Africa.

The licence gives Forest five years to start producing gas, and national oil company PetroSA, which also partners in the project, said that first output in 2013 was a realistic target.

Forest plans to feed the gas into a 700 MW power plant to boost supply in the country.

Van der Spuy said future excess gas could be supplied directly to industry in the Cape Town area via an onshore gas pipeline in which the government might be willing to take part.

"It's possible that the state may take a stake in a pipeline either through iGas which is the gas regulator or through PetroSA," he said.

Petro SA itself is developing the Jabulani gas field off the south coast of South Africa, with first gas expected in the middle of 2012.

Onshore companies are looking to explore for coal bed methane gas from South Africa's large coal deposits, while some companies are investigating the possibility of exploiting methane produced from boreholes drilled during gold production.

Van der Spuy said South Africa was not planning any new licensing rounds soon, but would award rights via direct negotiations. The process can take up to eight months, he said.

- Reuters