BN@10: The Lorimer interview – a rare ‘good news story’ as we dig deeper into SA’s oil and gas bonanza

During the second part of James Lorimer’s keynote address at BizNews@10, he is quizzed on the scale of and challenges to SA’s impending oil and gas boom. Lorimer admits it’s the first ‘good news’ story he’s probably been able to tell during almost a decade and a half as a Member of Parliament – but it’s one he says desperately needs to be exposed to a discouraged nation. Hard to disagree. Investors, too, will be taking note. For instance, real estate on the Cape’s Western and Southern coasts – and in the Karoo around Beaufort West – require more than a cursory glance. JSE-listed HCI too. – Alec Hogg

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Edited transcript of James Lorimer interview by Alec Hogg at the event celebrating the 10th anniversary of BizNews.

Alec Hogg: That’s an extraordinary keynote – the kind of talk you’d expect from an ANC cabinet member trying to get support for next year’s election. And yet here we have the opposition party’s shadow minister spilling the beans. Why are your political opponents not making these kinds of presentations? Why are you?

James Lorimer: One of the great disappointments I had on reaching Parliament was finding out that the ANC doesn’t read. They literally don’t read articles, books, or papers. They sit there and come to a committee meeting, looking at what’s been presented by the department, and ask questions, usually about bursaries and women in management. But they don’t really know what’s going on. That’s the primary reason. However, I am hopeful that they have learned their lesson from the bungled attempt to change the oil and gas legislation ten years ago. When that happened, the oil majors stopped investing. And I think that’s when it dawned on the ANC that they would have to compromise and be more realistic. There’s a lot of resource nationalism in the ANC, but there’s competition with other jurisdictions, and I think that message may be sinking in. We are going to oppose the legislation because of racial set-asides, but it may be something the oil and gas companies can live with.

Alec Hogg: How much money is going to be needed to exploit this resource? How much are we talking about here?

James Lorimer: I can’t give you a figure. What’s important is that the oil super majors like Shell and TOTAL are interested, and they have deep enough pockets to afford it. HCI is one South African company involved with these super majors. So you can expect money and expertise to come from outside.

Alec Hogg: Let’s start off the West Coast. How similar is the geology all the way down?

James Lorimer: I just knew you were going to ask a geology question! Apparently very similar. It’s the Orange Basin, and they’re stoked about the geology. They’ve proven it in Namibia, and the same features go all the way down the coast. They trust a geologist, but these ones I think you can trust because they’re talking about expending huge amounts of money.

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Alec Hogg: And you said that most oil exploration has a one in ten hit rate, yet here it’s 100%. That’s extraordinary.

James Lorimer: That is extraordinary. People are jumping up and down about Namibia. Two jurisdictions in the world are exciting to the oil majors at the moment: Namibia and Guyana of South America. That side of the country is very underdeveloped. The development of an oilfield there will have an impact onshore, with logistics and possibly electricity.

Alec Hogg: As a starting point, if you look at the far north of Mozambique and TOTAL’s huge find there, are there any parallels to what could happen on the west coast of South Africa?

James Lorimer: I don’t know. Mozambique seems to be more gas, and this is oil and gas. Oil is where the real money is, so that’s better than Mozambique in that sense.

Alec Hogg: Why has this been discovered only now?

James Lorimer: I think part of it is the technology. These things are incredibly difficult to undertake, and they haven’t had the technology to do that forever. In the Mozambique current, it’s even more difficult because of the strong current, and there are only a couple of oil drilling rigs able to cope with those conditions. So it’s very difficult.

Alec Hogg: Okay. So the West Coast is looking good. For context, we know that Norway is the richest country in the world on a GDP per capita basis. You say that the receipts by the Namibian government are likely to be, at the same scale as Norway. What does it mean for the Namibian people? Should we all be trying to get Namibian citizenship?

James Lorimer: They might be getting a lot of money for development, as long as they can keep the government’s hands off it. Because as we all know, the sad story of oil states is often that the resources get stolen. If that doesn’t happen, then things could go very well there. So far, a source in one of the oil majors said that the Namibian government cannot do enough for us, so they seem to be very sensible about it at the moment. Let’s hope that it continues.

Alec Hogg: It was quite interesting at the Davos event last year, Namibia had a huge stand, telling its story to the rest of the world. By comparison, South Africa had pretty much nothing. We’re getting a bit bitter, but there is an understanding of the asset that they own unquestionably from the way they are marketing it globally. So the West Coast looks really good. I know your political party is against Cape Independence because the DA says it wants to save all of South Africa. But would this huge oil and gas find not play into the hands of the Cape Independence Party or independent protagonists?

James Lorimer: I don’t think it should necessarily. In fact, it probably argues against it because there’s no way an ANC government would let go of the Western Cape if it knew it had oil and gas. Not for real.

Alec Hogg: Why would you? Let’s move to the other side of Cape Town, going east towards Mossel Bay. Give us some more details about the development opportunities there.

James Lorimer: They’re talking about a billion barrels of oil and 3 to 4 trillion cubic feet of gas, quite far offshore. The interesting thing is that the wells are about 64 kilometres away from the old gas infrastructure from the Mossel Bay gas project. So it would make it cheaper and quicker to connect that up, and then you could feed that gas back onshore at Mossel Bay. There’s enthusiasm for turning that gas to liquids plant from the Moscow gas back on. But it’s a very old plant, and it hasn’t had anything put through it for three years, so it might be more intelligent to push that gas to the peaking plant and maybe expand that to produce electricity there.

Alec Hogg: Would it have any impact on this town – Hermanus ?

James Lorimer: Cape Town has already benefited from using its docks to repair oil rigs. There’s no direct money from the oil and gas, but the spill-over in keeping those industries supplied is huge and very positive.

Alec Hogg: Moving further up the coast, there were quite a few prospects off the East Coast, off KZN, and then TOTAL and co seemed to run away. What happened?

James Lorimer: It was exploration, not strikes, but they were taken to court time and again. Although confident they would win, it just delays everything. When you have big capital to spend, you don’t want to keep it sitting around waiting for a court decision, so you send it somewhere else in the world.

Alec Hogg: Going further up the coast, the issue appears to be the Green Lobby. Tell us more about Big Green and those obstructing development.

James Lorimer: I must just say at this point that this is a much-discussed issue, even in my own party. I’m not speaking for the party on this, but I do think that Big Green is a threat. I come from a conservation background, and I’m extremely sceptical of many who I don’t think are interested in the environment. They are more interested in changing socio-economic relations.

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Alec Hogg: How do we combat that?

James Lorimer: Don’t take them at face value, investigate them, and be as sceptical of them as you are of oil companies. There are vested interests in Greens and in NGOs, so don’t be swayed by their appearances.

Alec Hogg: Okay. Regarding the big story of fracking resources in the world, and going back over a decade, the information showed we had the fourth biggest resources. But the environmental lobby has always been an issue. Explain how it has taken so long to even get to the point where there might be drilling in the future, and what the future could be.

James Lorimer: Government has invested a considerable amount of effort to not anger the environmentalists over fracking. They’ve taken the objections quite seriously. The Council for Geoscience, along with other multi-agency investigations, have been involved in this, and they’ve drawn up a report. Currently, it’s with Gwilym, who is deciding whether or not to share it with the public. And then they’ll start drawing up regulations. In the United States, they have drilling standards, and I imagine that we will end up with similar standards. If so, we can be fairly sure that there is no major environmental threat. There are other problems, like the availability of water for fracking, and then what to do with the water once it comes out again. It’s dirty and needs to be cleaned, but really, if there’s money to be made, they can afford to bring in their own water. So whether it’s piping it from the orange system or even using deep underground brackish water, it’s solvable. My attitude to the environmental stuff is just, you know, don’t mess it up. Make sure that it is sustainable, and then when you’re finished extracting, leave as tiny a footprint as possible. It certainly doesn’t make sense to destroy water sources or farmland. So as long as you’re not doing that and it still makes financial sense, then go for it.

Alec Hogg: James, the Western Cape is held up as a template of good governance. Is there enough power devolved to the Western Cape that they could go it alone on something like this if there were feet dragging at the central government?

James Lorimer: I don’t think so. This is a central government function – oil and gas, minerals. But if we controlled national government, we might not feel the need to devolve something like oil and gas to a province. In general, we believe in federalism, so we might increase the powers granted to provinces, which is a double-edged sword. Everyone wants to live in the Western Cape with lots of powers, but no one wants to live in the northwest with lots of powers. So that’s something to measure.

Alec Hogg: It almost sounds too good to be true. All of this. And especially coming from someone who doesn’t have an agenda to make the country look brighter right now. So help us understand this. Why are you telling the story of hope?

James Lorimer: Well, it’s there, and we should all know. The main thing about a democracy that works is everybody knows what’s at stake. So it’s partly that, partly just because it interests me greatly. And I suppose also because people need hope. Everybody’s very gloomy these days, so we need some good news. This is incredibly good news. It’s probably the first good news story I think I’ve ever told, but it’s been great fun.

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