South Africa to see shale exploration in the next 12 months

South Africa flag
Source: DollarPhotoClub

South Africa – a country which currently  uses its large coal deposits to meet most of its energy needs – is likely to start shale exploration in the next financial year, according to a statement issued by the government on 8th March.

“One area of real opportunity for South Africa is the exploitation of shale gas. Shale gas regulations were published in the second quarter of 2015-16. Exploration activities are scheduled to commence in the next financial year. This will lead to excellent prospects for beneficiation and add value to our mineral wealth”, the South African government said in a statement published on its website Tuesday.

“Currently South Africa is a net importer of energy sources such as crude oil, refined petroleum products and natural gas. It is estimated that the Karoo shale gas resources would mean South Africa has the fifth largest reserves, estimated at 485 trillion cubic feet (Tcf),” Minister for Mineral Resources, Mosebenzi Zwane said in January. “We however take a conservative view of a 30 Tcf economically recoverable resource, which is equivalent to 30 times the size of the Mossgas plants.”

As Reuters reports, a study commissioned by Shell 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.

So far, Royal Dutch Shell, Falcon Oil & Gas and Bundu Gas & Oil are among five companies which have applied for exploration licenses under the Karoo, which in itself is believed to hold up to 390 trillion cubic feet of technically recoverable gas reserves.

Back in March 2015, Royal Dutch Shell seemed to be at a brink of abandoning Karoo exploration;  it has now reiterated its interest in the area saying: “We are following recent media reports on this matter. To date no exploration licences have been issued in South Africa for shale gas development.

“We will continue our ongoing consultation with government, industry and the people of South Africa about the long-term opportunities of shale gas exploration and the regulations that will govern this industry,” Shell said.

“Should supportive petroleum legislation and attractive commercial terms be put in place, the Karoo project could compete within Shell’s global shale gas and oil portfolio.”

Dublin-based Falcon Oil & Gas, which nine years ago obtained a technical cooperation permit covering 7.5mn acres in the southern part of the Karoo Basin, said on March 9 that the Petroleum Agency of Africa (PASA) “recently confirmed that it expects to finalize a recommendation to the Minister of Mineral Resources on Falcon’s application for a shale gas exploration licence in South Africa’s Karoo Basin by May 2016.”

The company, which works in collaboration with the U.S. giant Chevron, jointly obtaining shale exploration licences in South Africa, said it expects to receive a full licence to explore for shale gas in 2016.

South Africa’s energy and chemical company Sasol has also been eyeing the country’s shale reserves with interest. Although the company has not held a licence within the Karoo region since the Technical Co-operation Permit expired in 2011, it now views Karoo’s shale resources with renewed interest.

“Shale gas fracking remains on Sasol’s radar and should an opportunity with favourable geology present itself in South Africa, we will assess its viability. Importantly, we are supportive of fracking undertaken in an environmentally responsible manner, and will not support activities that do not comply with this principle,” Sasol said, adding:

“Our view is that the area we evaluated was too challenging to explore, develop and produce. However, we will continue to monitor the South African shale gas landscape for any new developments.”

The Karoo isn’t the only area targeted for shale gas exploration. In February, Rhino Oil and Gas Exploration South Africa said it plans to explore 7.4 million hectares (18.28 million acres) in South Africa — more than half of it in KwaZulu-Natal including Pietermaritzburg, plus sites in the Free State and Eastern Cape, News24 reported.

Predictably not everybody is enthusiastic about South Africa developing its shale resources. While shale gas could help the energy-starved country to move away from coal as the main source of power, it comes with its own environmental challenges, one of which is the shortage of water needed for fracturing operations in the arid region of Karoo.

Jonathan Deal is CEO of Treasure Karoo Action Group in the Eastern Cape said: “We have water shortage. For our government to even consider an activity that takes place above and around our very precious water source which has the potential to pollute it, is really nonsensical.”

Yet it’s not only the environment that may be adversely affected by shale exploration. This week saw the publication of the first chapter of an assessment commissioned by the government’s interdepartmental task team in May last year, that outlines the impact shale might have on local municipalities.

The assessment of the shale-affected area, which extends from Carnarvon in the north, down to Prince Albert in the south, and from just outside Calvinia to Queenstown, has found that there is a marked disparity between municipalities and while the economies in western towns are, in general, more diversified and resilient, and are likely to benefit form shale exploration in the area, incompetent municipalities with a history of poor governance, corruption and a lack of capacity, may not be able to manage the impact and implications of fracking.

Assessment leader Professor Bob Scholes, who is a professor at the University of the Witwatersrand, and an associate research at the CSIR, said:

“Those towns within efficient municipalities are likely to steadily grow their economic base… This will lock in further rounds of investment. (…) Where municipalities are poorly skilled, corrupt or politically conflict-ridden, the only force for economic sustainability will be civil servants and middle-class investors, whose numbers may well shrink as they migrate away.”

“It is possible that the weaker municipalities may steadily improve their performance. However, their ability to deal with complex aspects, for example, of manufacturing and mining investment will take many years to develop,” he said.

The full assessment will focus on 12 areas: biodiversity and ecosystems services, water resources (surface and groundwater), geophysics, economics (including agriculture and tourism), spatial planning, national energy planning, waste management, human health, air quality, social fabric, visual, heritage resources and sense of place.

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