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Shell fends off legal challenge to explore for oil, gas off South Africa

Highlights

Environmentalists argue for seismic impact on marine life

Many new oil, gas projects face climate hurdles

Cloudy outlook for Africa upstream due to energy transition

Shell will be permitted to undertake seismic exploration work off the eastern coast of South Africa after a High Court ruled in favor of the energy major in response to a legal challenge by environmental groups.

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It comes a day after Shell cancelled its plans for the major Cambo oil project in the UK West of Shetland area 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 hangs in the balance due to climate change pressures, as the energy transition prompts a backlash against the fossil fuels industry.

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

But on Dec. 3, Judge Avinash Govindjee, at the High Court in Makhanda, said the claims of irreparable harm to the marine environment were "speculative at best."

"I accept that the applicants are of the firm view that the survey will cause irreparable harm. But objectively speaking, a reasonable apprehension of irreparable harm has not been established," he said in a hearing broadcast online.

Energy-hungry country

Shell said it was pleased with the decision and confirmed it had conducted an environmental study in line with regulatory requirements, and had obtained legal permits to carry out exploration activity.

"South Africa is highly reliant on energy imports for many of its energy needs," Shell said in a statement. "Should viable resources be found offshore, this could significantly contribute to the country's energy security and the government's economic development programs."

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

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

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

Drilling has slightly picked up in the past few years after TotalEnergies made a "game changing" deepwater natural gas and condensate discovery with the Brulpadda well in early 2019.

TotalEnergies and its partners have so far made two significant gas condensate finds -- Brulpadda and Luiperd -- in deepwater blocks off South Africa's Western Cape, raising hopes for a new gas push. In recent days the French major also spudded a closely watched exploration well offshore Namibia near the maritime dividing line with South Africa.

Climate activism

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.

However, Pooven Moodley, executive director of Natural Justice, said: "The outcome is very unfortunate, especially since the judge did not recognize the urgency of the interdict and the immediate threat the seismic surveys pose to the environment, marine life and local communities."

Despite holding significant oil and gas reserves and pumping around 10% of the world's crude oil, Africa has seen upstream investment fall sharply in recent years, exacerbated by the energy transition away from oil and gas.