South Africa: shale regulations finalised, licencing imminent

Karoo desert, South Africa
Source: DollarPhotoClub

South African minister of mineral resources Ngoako Ramatlhodi announced in the Parliament on May 7th that regulations on shale gas exploration have been completed and will be published in the Government Gazette within a month. After that the department could start issuing exploratory licences – earlier than the previously expected date in August.

“We have finalised the regulations, we have finalised the communications strategy. They have passed through the inter-ministerial committee so we are taking them now to the economic committee,” Ramatlhodi told a media briefing ahead of his department’s budget vote.

“I think in two weeks’ time we will begin to talk quite a lot.”

The minister’s statement underlines the commitment of the South African government to the development of shale resources in the country. Back in February, Nhlanhla Nene, the country’s Finance Minister announced an investment of R108 million ($15.4 million) for research and regulatory requirements for licensing shale gas exploration and hydraulic fracturing.

The Karoo Basin in central and southern South Africa is a major sedimentary basin, extending across nearly two-thirds of the country, which contains thick organic-rich shales. At around 485 trillion cubic feet of estimated shale gas reserves, the U.S. Energy Information Agency (EIA) puts South Africa’s Karoo desert at the fifth place when it comes to world shale gas deposits.

As Reuters reports, a study commissioned by Royal Dutch Shell – one of four exploration companies with properties in the Karoo – said extracting 50 trillion cubic feet or 12.8 percent of potential reserves, would add $20 billion or 0.5 percent of GDP to the South African economy every year for 25 years and create 700,000 jobs.

And yet, in March, Shell announced that it was pulling back from its shale projects in South Africa, despite saying only two months earlier that it’s operations will be unaffected by the falling oil prices.

Analysts believe that one of the reasons for the cooling of the enthusiasm of foreign drilling companies when it comes to the Karoo is The Mineral and Petroleum Resources Development Amendment Bill, passed by lawmakers last year. It proposes to give a 20 per cent free stake in new oil and gas projects to the state even before the companies launching them have had a chance to recoup their costs. This stake can be significantly increased at “an agreed price” once the project is profitable.

Whatever the reason for Shell’s loss of interest, at the time the anti-fracking group the Treasure Karoo Action Group (TKAG) accused the company of feigning withdrawal to put pressure on the government to speed up the Karoo development.

“Shell is a seasoned campaigner and what may at first blush appear to be a withdrawal from Karoo shale gas, may just be a Trojan horse,” TKAG head Jonathan Deal said in a statement.

The development of shale resources in the Karoo is strongly opposed by local environmental groups.

In reaction to the minister’s announcement, Jonathan Deal, of Treasure the Karoo, the group that has mounted the fiercest resistance to fracking, said: “If they elect to issue exploration licences without proper consultation with stakeholders on regulations that are as yet unseen, they will be taken to court.”

One of the concerns expressed by environmentalists is that hydraulic fracturing operations will further deplete Karoo’s scarce water resources, causing a huge environmental damage.

“We have taken into consideration the issues of water and regulations are going to address this sufficiently, providing proper guidance on how to undertake hydraulic fracturing,” said Thibedi Ramontja, director general in the department of mineral resources.

It would take companies about three years of exploration to determine if the Karoo reserves were commercially viable, before moving into possible production, he added.

Image: Karoo desert

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