Brazil's state-owned oil company Petrobras has taken another step in its international expansion by acquiring a 10% stake in the Deep Western Orange Basin (DWOB) block offshore South Africa from TotalEnergies. This move, which aligns with Petrobras’s long-term strategy to diversify its portfolio, comes at a time when South Africa is eager to develop its energy sector to reduce dependence on foreign oil and enhance energy security.

The acquisition is part of Petrobras's broader goal to replace its oil and gas reserves by exploring new opportunities both within Brazil and abroad. The DWOB block is located in a geologically promising region, bordering Namibia to the north, where significant discoveries have been made by major players like TotalEnergies, Shell, and Africa Oil Corp. TotalEnergies will continue to operate the block with a 40% stake, while other partners, including QatarEnergy (30%) and Sezigyn Pty (20%), will remain involved.

The block covers 3,000 square kilometers, with the surrounding areas being the subject of recent exploration successes. TotalEnergies first joined the project in 2017, and this year signed further agreements with QatarEnergy to expand its interests in South African offshore fields. The DWOB acquisition followed a competitive process and fits within Petrobras’s 2024-2028 strategic plan.

The DWOB block, situated within the Orange Basin, is part of a broader region that has seen renewed interest from global energy firms. Block 3B/4B, which lies nearby and covers a much larger area of 17,581 square kilometers, also has a consortium of players—TotalEnergies, QatarEnergy, and Sezigyn  (a “general trading” company based in Johannesburg who headed exploration in 2018).

This basin, located off the western coast of South Africa, holds significant geological promise. The region’s history of sedimentation, dating back millions of years, points to large potential reserves.

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Geologically, the area has similarities with oil-rich basins in Namibia. The key source rock is believed to be deep-water marine shales formed in the early Cretaceous period. These shales, combined with sands deposited by ancient river systems such as the Orange and Olifants rivers, have created promising reservoirs. The region’s tectonic activity during the late Cretaceous era also provided further sand pulses into the deepwater basin, potentially enhancing reservoir quality. This makes the Orange Basin an area of particular interest for companies looking to expand their exploration portfolios.

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Geopolitical Context

Petrobras’s move into South African waters is not just a business decision; it comes against a backdrop of geopolitical shifts. South Africa, under pressure from global oil price volatility, has been seeking to develop its domestic oil and gas resources. In 2023, Deputy Minister of Mineral Resources and Energy, Dr. Nobuhle Nkabane, outlined the government's plans to accelerate exploration efforts. South Africa's Gas Master Plan and the Upstream Petroleum Development Bill are two key policy initiatives designed to bring regulatory clarity and attract foreign investment into the sector.

These efforts are seen as crucial for energy security, particularly as recent conflicts in the Middle East threaten oil price stability. Nkabane has emphasized the importance of natural gas as a transitional energy source, one that can help South Africa reduce its reliance on coal and meet its climate change targets, especially since the main green sources (wind, solar) tend to provide unstable supply which fluctuates with the weather. Recent gas discoveries in Mpumalanga, a province that already plays a central role in South Africa’s energy infrastructure, have added momentum to these efforts. However, the Deputy Minister also warned against the temptation to prioritize exports to Europe at the expense of local energy needs, a problem that has affected coal trade in the past.

South Africa’s energy ambitions have not been without challenges. Environmental NGOs, many of which receive funding from abroad, have complicated the country’s ability to attract investment by waging a long campaign of lawfare against drilling companies. While these NGOs can occasionally act independently of their funders, their backers in the main cluster of larger trans-Atlantic NGOs ultimately receive their funding from Western finance and American security departments like the CIA, which suggests that their presence has a strategic role to play, though whether this pattern of behaviour reflects raw geopolitics, or the United States' more general strategic support for climate change policies abroad is hard to tell.

Brazil, as a BRICS member, brings its own geopolitical complexities to the table. Petrobras’s involvement in South Africa’s energy sector could be seen as a small part of a broader BRICS strategy to counterbalance Western influence, particularly in the energy domain. But the country’s BRICS membership is counterbalanced by the left-leaning government's successful fostering of strong relations with the United States to crush its main right wing opposition and ban the social media platform X, which refused to censor political critics of the Brazilian government, in line with the Democratic Party's similar desires to re-impose censorship on the platform.

The German Green Party also exercises its influence through the Heinrich Böll Stiftung, which also funds such lawfare activities, which have had a strongly negative impact on power generation in South Africa, and other German green energy lobbyists have a significant reach in the Democratic Alliance, which is currently a coalition partner to the ANC, though the DA themselves have so far exerted rather marginal influence on ANC policy.

This complexity makes the intensions of major powers and their degree of control very difficult to read without inside information.

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Global Energy Shifts

Petrobras’s acquisition is emblematic of a broader shift in the global energy landscape. As traditional oil-producing regions become more unstable, companies are increasingly looking to new frontiers. Africa, with its vast untapped reserves, has emerged as a key focus for international energy firms. The Orange Basin, in particular, holds significant promise, not only for oil but also for natural gas—a resource that is playing an increasingly important role in global energy strategies.

South Africa’s energy sector, long dominated by coal, is in the midst of a transition. The country has committed to reducing its carbon emissions and has identified natural gas as a key component of its future energy mix. Currently, natural gas accounts for just 3% of South Africa’s energy supply, but the government hopes to expand this significantly in the coming years. The recent discoveries in Mpumalanga could help the country achieve this goal.

However, the challenge for South Africa will be balancing its domestic energy needs with the lure of export markets. Europe, facing its own energy crisis, is looking to Africa as a potential source of natural gas. But as Nkabane has pointed out, exporting gas too quickly could leave South Africa vulnerable. The country must first ensure that it has the infrastructure in place to meet its own energy needs before looking to international markets.

For Petrobras, the South African venture represents a calculated risk. The company is no stranger to the challenges of operating in politically and economically unstable regions. In recent years, its operations in Brazil have been affected by corruption scandals and political interference. By expanding into South Africa, Petrobras is betting on the long-term potential of the Orange Basin. But it is also entering a market that is still in the early stages of development, with all the uncertainties that come with it.

In the coming years, much will depend on the success of South Africa’s regulatory reforms and the ability of companies like Petrobras to navigate the country’s complex political landscape. If successful, the DWOB block could become a key part of Petrobras’s international portfolio, helping the company meet its goal of replacing its oil and gas reserves. But the road ahead is likely to be a challenging one, both for Petrobras and for South Africa.

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