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Shell cancels seismic work offshore South Africa after legal challenge

Highlights

High Court told Shell to halt work because of flawed consultation

Environmentalists say seismic activity will impact marine life

Upcoming oil and gas projects face climate hurdles

Shell bought into Transkei & Algoa licence in late 2020

Shell has suspended seismic exploration activity off South Africa's east coast, terminating a contract for the Amazon Warrior survey vessel after a High Court ordered it to pause work after a legal challenge by environmental groups.

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"As legal hearings about the survey are not yet completed and the weather window for conducting the work is limited, Shell has decided to terminate the current contract for the survey vessel early, in agreement with the contractor," a Shell spokesperson told S&P Global Platts Jan. 5.

"We are looking ahead to a resolution of the outstanding legal case and are considering best way forward for the license in the longer term."

Judge Gerald Bloem at the South African High Court in Makhanda said Shell had failed to carry out required local consultations and there were concerns over the impact on marine life.

In the Dec. 28 ruling, Judge Bloem said Shell's right to explore waters near the Wild Coast "was awarded on the basis of a substantially flawed consultation process".

Shell had entered into a term with Shearwater GeoServices to use the survey vessel Amazon Warrior for its 3D seismic exploration project in South Africa.

The Amazon Warrior was en route to Las Palmas, Spain, on Jan. 5, data from Platts cFlow, trade-flow analytics software, showed.

The survey vessel had returned to Cape Town, South Africa, on Jan 3, after being offshore late November to begin exploration activity, according to Platts cFlow data.

Climate hurdles

Four environmental groups, including Greenpeace and Natural Justice, went to court Dec. 1 demanding Shell cease exploration off South Africa's Wild Coast, citing alleged "irreparable harm" to marine life, as the region is a breeding area for whales.

On Dec. 3, Judge Avinash Govindjee, at the High Court in Makhanda, said the claims of irreparable harm were "speculative at best". The groups appealed that verdict, leading to the Dec. 28 ruling in their favor.

In November 2020, Shell acquired a 50% stake in the Transkei and Algoa license from Impact Oil & Gas, which has retained the remaining 50%.

Shell had planned a series of seismic surveys off the Eastern Cape coast of South Africa to establish whether the region has potential hydrocarbon deposits.

The seismic work had been scheduled to start Dec. 1 and last up to five months.

Shell had always defended its seismic work off South Africa saying it had conducted an environmental study in line with regulatory requirements and obtained legal permits to carry out the activity.

Last, month, Shell canceled its plans for the major Cambo oil project in the UK west of Shetland following a barrage of criticism, saying the economics of the project were insufficiently strong and it was worried about delays.

The future of some upstream oil and gas projects are now hanging in the balance due to climate change pressures, as the energy transition prompts a backlash against the fossil fuels industry.

Energy-hungry South Africa has been desperate for bigger offshore developments, but relatively little exploration has been carried out.

Drilling briefly picked up after TotalEnergies made a deepwater natural gas and condensate discovery with the Brulpadda well in early 2019 but then the COVID-19 pandemic led to another slowdown in upstream activity.

In 2021, many oil and gas companies have faced a pummeling from environmental activists and shareholders, pressuring them to set tougher long-term emissions targets and abandon key developments.

Rising opposition to fossil fuels is shrinking the appetite for frontier drilling, and it is particularly affecting Africa, one of the most energy-starved regions of the world.