Feature: Impact Oil at 'pivot point' after Namibia success but S Africa woes linger

Above-ground risks in South Africa have left it lagging far behind neighboring Namibia despite the prolific Orange Basin spanning both countries, the CEO of Impact Oil & Gas said, as the tiny explorer prepares to become an oil producer through its stake in TotalEnergies' Venus find.

London-based Impact, a pure-play exploration firm focused on the offshore Atlantic margins, holds 160,000 sq km of acreage across South Africa and Namibia, mostly in the former. In Namibia it has stakes in Blocks B212 and 2913B, which contains the up to 3 billion barrel Venus discovery.

Two-thirds of the Orange Basin sits within South African waters, but while Namibia's portion is today the world's hottest exploration destination with a string of high-profile discoveries and numerous active rigs, South Africa's oil sector is experiencing a years-long lull.

"There can only really be one reason why you haven't seen an acceleration of activity on the South African side," said Impact's Siraj Ahmed in a wide-ranging interview. "It's not that the geology stops at the boundary. It's that the [Namibian] environment for investing and operating is much clearer, the fiscal terms are much clearer."

Gear shift

With a team of just 15 people and considerable technical expertise, Ahmed said Impact had carved out a niche finding well-priced off-beat exploration opportunities.

"We invest heavily in technical work to organically develop opportunities," he said. "We try to look not where the herd is racing but where there might be opportunities that are accessible, affordable and attractive for a small player like us."

Namibia's Orange Basin was relatively underexplored and the country at large regarded as an exploration graveyard following a number of disappointing spuds in the 1970s and 1980s.

Nevertheless, "Namibia fitted what we were looking for," said Ahmed, with a "play concept" defined by the company's exploration director. Impact funded 2D and 3D seismic before farming out to TotalEnergies.

"Suddenly everyone is finding the things that we found of interest in our license. We were honest to our strategy and prepared to take the risks that others were not," he said. Namibia's Orange Basin could hold 6 billion barrels of recoverable oil.

Impact's strategy to date would involve exiting Namibia, but instead it is staying put, having reached a "pivot point" after agreeing to sell additional stakes in its two blocks to TotalEnergies. Impact will keep 9.5% shares in Blocks 2912 and 2913B, while TotalEnergies will hold 42.5% and 45.25% respectively.

Ahmed said the deal should make Impact a producer for the first time and allow it to participate in further exploration activities on the blocks.

The transaction "ensures we are committed to Namibia for the long term," he said. "When we look at what we've discovered versus the extent of acreage that we have, the potential for exploration upside is quite significant."

He added: "The deal with Total really allows us to mitigate what is prob the most important risk -- the financial risk -- and provides funding for us to see through the exploration, appraisal as well as any development on the block until first oil."

Venus was tested in Q3 2023 with positive results, and TotalEnergies has followed up with a multi-well drilling campaign, as well as 3D seismic acquisition on the southern part of 2913B. Meanwhile Shell, Galp and others have also recorded significant discoveries nearby.

Although TotalEnergies CEO Patrick Pouyanne has been tight-lipped on the Venus project, Ahmed said first oil in 2029-2030 "is not an unreasonable window" and in line with Impact's hopes.

South Africa woes

Across the maritime border in South Africa is a different story. Impact holds large blocks in the east -- Algoa&Transkei and Area 2 -- as well as acreage in the Outeniqua Basin through its 36.2% stake in Africa Energy Corp, where two gas condensate discoveries have been made, and in South Africa's Orange Basin.

"South Africa is a bit of a tale of two halves, the above-ground and the subsurface," said Ahmed. "From a subsurface perspective I would go as far as saying it's a sweetshop for explorers." However, uncertainty around fiscal terms and environmental protests mean "the above-ground risk has become disproportionate to the opportunity," he said.

South Africa's upstream fiscal terms were reopened over a decade ago, but a resolution on the new upstream petroleum resource development bill has not been reached, leaving "the industry in a state of hiatus," said Ahmed. Meanwhile various majors from ExxonMobil to Equinor and Eni have opted to leave.

As well as legislative sluggishness, activists in South Africa have proven successful at blocking hydrocarbons development.

"We desperately need fiscal certainty and stability and the anti-oil lobby has been very active in South Africa and it has done everything it possibly can to stifle and delay any progress on the oil and gas side," said Ahmed, adding that the "legal system has been used in a way to deliberately damage investment."

Ahmed said that the above-ground risk can change and that it was vital the industry listens to legitimate concerns from local communities. However, he expressed concern that the upstream bill would not become law ahead of South Africa's May election. The legislative process would have to start afresh afterwards, he said.

Oil market

While Impact continues to scour the world for new exploration opportunities, Ahmed said the company would "take stock" after the TotalEnergies transaction closes.

"There are not many smaller explorers like Impact that remain out there. We have an opportunity to go after things that are slightly off-piste, quirky, interesting, higher risk," he said. "Those opportunities are there for us and there are not many people chasing them."

One thing he is not concerned about is future oil demand, particularly given Africa's unmet domestic energy demand.

"[Pouyanne] was clear it's not for the NGOs to dictate to Africa their policies on energy security," Ahmed said. "All the businesses that we look to work with and attract are recognizing that there is a need for more hydrocarbons and they will play a role in the energy mix for a long time yet."