Eni SpA is pulling out of plans to explore for oil with Sasol Ltd. in a large block off South Africa’s southeast coast due to concerns over the technical challenges of drilling in deep waters, according to two people familiar with the decision.
The people asked not to be identified as the matter is private.
The companies partnered in 2014 to drill the ER236 exploration permit off the coast of the KwaZulu-Natal province, with Eni taking a 40% stake and becoming operator. Sasol won the rights to explore the block from the Petroleum Agency of South Africa in 2013.
Aside from technical difficulties of drilling for hydrocarbons in waters of between 1-3 kilometers (0.6-1.8 miles) deep, oil companies have also been frustrated by delays in passing South Africa’s draft oil exploration and production law. The Upstream Petroleum Resources Development Bill, that would give clarity on how the country’s nascent oil and gas industry would be regulated, is unlikely to be finalized for at least another year, despite the government’s call to fast-track the process.
