South Africa aims to cash in on East Africa energy boom

South Africa's budding energy service industry is aiming to reap the benefits of new natural gas and oil finds along Africa's east coast, where geographical proximity gives it the edge over other hubs in Europe, Singapore and Dubai.

Located at the foot of Africa along a major shipping route, South Africa is well placed to take advantage of increased exploration by global energy companies in East Africa, where large gas discoveries over the past year have excited global interest.

The US Geological Survey estimates that more than 250 trillion cubic feet of natural gas may lie off Kenya, Tanzania and Mozambique, and discoveries announced this year may hold enough gas to supply major European economies for at least one year.

South Africa, the continent's largest economy, views its ship and oil rig repair industry as a potential niche market that could, conservatively, triple its annual revenue to 3 billion rand ($363 million) by 2015 and create 3,000 jobs.

"Our real competitive advantage lies in our proximity to the action," said Warwick Blyth, chief executive at the South African Oil and Gas Alliance (SAOGA), the industry body.

"If you need a piece of kit brought down, a motor rewound or a rig sorted out without taking an extra month of towing, then it's usually brought here," he told Reuters on Friday.

Cape Town is considered a leading logistics and service hub for oil operators in Nigeria, Africa's top oil producer on the continent's west coast.

Blyth said that projected repair savings for rig operators in Africa can be massive considering the time costs associated with towing a rig to Singapore, which could take up to 100 days for a rig that rents out at $500,000 a day.

Mozambique activity

DCD Marine, which operates Cape Town harbour's dedicated rig repair berth, said that its clients include all the large drill-ship and rig operators working on Africa's east and west coasts, such as Transocean and Halliburton.

"DCD Marine expects an uptake in business as more rigs and ships are coming offshore Mozambique to exploit gas finds in the area," said Gerry Klos, the company's general manager.

Cape Town and Saldanha Bay, where MAN Ferrostaal's oil and gas shipyard was largely idle since being built in 2007, has experienced a steady increase in business over the past 18 months.

"Right now we are exceptionally busy. We've had three to four projects going simultaneously; big projects in the order of about 200 million rand each," Blyth said.

However, South Africa's government says that resolving critical customs and excise issues related to storing and moving oil and gas equipment in and out of Africa is vital for the local service industry to grow.

A lack of capacity and investment at ports is another challenge, said Blyth, adding that a proposed one billion rand Saldanha Bay quay for deep sea oil rigs would help to maintain the double-digit annual growth rates the industry needs. ($1 = 8.2612 South African rand)