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Deepwater exploration binge off South Africa

Johannesburg - Drilling will begin on the first of two deepwater oil exploration wells off the west coast of South Africa at the end of April at a combined cost of about $100 million (R595 million).

Jack Holliday, the chief executive of the Petroleum Agency South Africa, said international energy companies such as BHP Billiton Petroleum, Forest Exploration and Occidental Petroleum would be the first ever to drill deepwater exploration wells in South African waters.

They will be drilling at a depth of 1 600m to about 5 000m.

"There is active exploration at below 2 000m. Each hole is drilled to about 4 000m below the seabed. This is five times the height of Table Mountain," he said.

The first well will be drilled by Forest and South African parastatal PetroSa, which have a joint venture. The second well will be drilled in July by Occidental and BHP Billiton.

Each well will cost between $30 million and $50 million to drill.

One of the reasons Holliday said these holes were so expensive was because dynamic drill rigs were in short supply and came with a $250 000 a day price tag.

Nine energy companies have invested a total of $9 billion in oil and gas exploration in South Africa.

Holliday painted a sobering picture of the world's energy situation at a conference held in Johannesburg on Friday. He said that, put in simple terms, the world was only discovering 6 billion barrels a year while it was consuming 27 billion barrels a year.

"We are draining reserves four times faster than they are being filled."

Added to this the International Energy Agency (IEA) forecasts that energy demand "will almost double in the next 25 years".

The organisation said crude oil demand would grow from 70 million barrels a day to more than 120 million barrels a day.

With this huge demand scenario Holliday said the IEA was forecasting that over the next 25 years $300 billion would be spent on energy exploration in Africa, "most of it on oil and gas exploration development".

One example of a company doing this was US-based ChevronTexaco, which said in late 2003 it planned to spend $20 billion in West Africa over the next five years.

Holliday said it was likely the money had already been spent.

According to the average statistics of the major oil companies on global oil reserves the world had about 1.93 trillion barrels of oil.

The world consumes 700 000 barrels of oil every 10 minutes, or 1 billion barrels every 14 days. There is huge urgency to find more oil reserves, but oil exploration is very high risk and very expensive.

Holliday said that last year one unnamed oil firm drilled 15 dry wells.

"Theorists may argue about the date [for the depletion of hydrocarbons]. That's really not relevant - what is relevant is the fact that it is being depleted faster than its being found.

"Sometime in our lifetime we are likely to see the effect of production not being able to meet an ever growing demand."

Editorial Notes: Original title: "Drilling for oil off SA coast to cost $100m".-LJ

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