Gas
Friday, 12 October 2012 10:32

SA Cabinet – approves fracking exploration

The Cabinet recently lifted its moratorium on shale gas exploration in the Karoo. 25° in Africa gives an industry perspective on the current developments.

The South African Cabinet recently approved the lifting of the moratorium on shale gas exploration in the Karoo Basin, which was imposed in February last year, allowing licences for the exploration of shale gas to be issued under certain circumstances. “Under the Cabinet decision, the actual fracturing cannot be done now, even though exploration will involve some drilling,” said the Minister of Mineral Resources, Susan Shabangu.

South Africa’s Department of Mineral Resources (DMR) says it will move to consider the shale-gas licence applications for the Karoo basin, but indicated that only “normal” exploration “excluding actual hydraulic fracturing”, or fracking, will be allowed until the country’s mining regulations had been “augmented” to take account of the unique issues posed by the process.

The task team report findings

The Cabinet’s decision to lift the moratorium was made after a task team submitted a lengthy report – the executive summary of the report was recently presented by Shabangu. Headed by the chief executive of PetroSA, the team is made up of the Departments of Environmental and Water Affairs, Science and Technology, Energy, Mineral Resources, SKA SA, the Council of Geoscience, the Water Research Commission and Eskom. Environmental factors, technical specifications of fracking, the regulatory framework, the impact on the Square Kilometre Array (SKA) project and the economic implications of a ban were considered.

In compiling their report, members of the task team completed study visits to the United States, Marcellus Shale in Pennsylvania and Eagle Ford Shale in Texas, as well as to energy regulators in the respective states.



Certain conditions

Presenting the executive summary of the department’s report on the investigation of the environmental and social impact of hydraulic fracturing in the Karoo Basin, Shabangu said the report states certain conditions which may lead to the exploration process being halted. “We are a water-scarce country. If the process is such that there is a threat to water in South Africa, we would have to stop the process. If there is going to be an extremely negative impact on the SKA project and they cannot mitigate it, we may need to stop the process,” she said.

Extensive studies needed

Importantly, according to the executive summary, extensive hydrological and geohydrological studies will be required before drilling takes place in order to minimise or eliminate potential impacts on other users. “Because of the uncertainty regarding the extent, or even existence, of economically producible reserves, any assessment of the potential economic impact is subject to enormous uncertainty,” states the report.


Potential resources

According to the executive summary, the United States Energy Information Administration has made a first-pass estimate of a technically recoverable resource of 485-trillion cubic feet (Tcf) of gas in the Karoo Basin. “The Petroleum Agency evaluated this assessment and concluded that, owing to the limited amount of available data in the area, it is impossible to quantify the resource accurately, other than to say that it is potentially very large. It is essential that additional, modern subsurface information should be obtained through drilling or a geophysical survey to constrain these estimates,” states the summary.

The summary goes on to say that, while the existence of a significant gas resource in the Karoo would have implications for South Africa’s energy security by reducing national dependence on other fossil fuels, the magnitude of this potential is subject to considerable uncertainty owing to the difficulties in quantifying the resource.

Stakeholder engagement

Shabangu also announced that the government would now begin engaging with community members and role-players that would be affected by shale gas exploration. Detailing the recommendations by the fracking task team, contained in the report, Shabangu said these included constituting a monitoring committee to supervise fracking operations, among other things. The monitoring committee would ensure that regulations are followed and that appropriate regulations, controls and co-ordination systems are established between the next six to 12 months.

In addition to the setting up of a monitoring committee, the task team recommended that SKA SA should work closely with the department to ensure that the multi-billion rand telescope project is not compromised. The task team also recommended that ongoing research should be carried out on the environmental impact of shale gas and to develop new and better methods for hydraulic fracturing.

Shabangu also added that the government wants to ensure that there is broad economic participation in the exploration of shale gas and that environmental regulations are adhered.

An industry perspective

The oil giant Shell has welcomed Cabinet’s decision to lift the moratorium on shale gas exploration in South Africa. “The Karoo Basin offers a potential exploration opportunity for shale gas, which we believe will be instrumental in meeting South Africa’s growing energy demand,” Shell SA chairman Bonang Mohale said in a statement.

According to the statement, Shell would “continue to work closely with local people in the Karoo and other stakeholders to address concerns and ensure they benefit from our work”. The company would also continue to listen to the views of Karoo residents and explain in detail what their plans entail.

An economic perspective

The Gas Equation; which provides an analysis of the potential of the natural gas industry in South Africa, by PwC, states that there is significant, albeit unproven, potential for indigenous gas reserves, mostly in the form of shale gas in the onshore Karoo Basin. A study by the United States (US) Energy Information Agency (EIA) on world shale resources outside the US concludes that there is as much as 1,834tcf risked gas in place and 485tcf recoverable shale gas reserves in the Karoo Basin. “This places South Africa in the fifth position in terms of shale gas reserves outside the United States,” states the report.

At a recent presentation on the study, Chris Bredenhann, energy leader at PwC Southern Africa, noted that the numbers on the availability of shale gas in the Karoo are based on theoretical projections. Conclusions on the potential reserves have been drawn based on the geology and experience of shale gas exploration in the US. According to Bredenhann, no work has been done to date to confirm whether there is, in fact, gas in the Karoo Basin. “The true extent of the reserves can only be proven through further technical studies and drilling wells to prove that there is gas in place and that it can be viably extracted,” Bredenhann noted. “It is a potentially huge debate about nothing,” he added.

Environmental concerns

Saliem Fakir, head of WWF-SA’s Living Planet Unit, notes that the organisation still has certain concerns regarding fracking. “As such, the organisation calls for the moratorium to be reinstated in order to allow time for further reflection on key environmental externalities, such as the water and carbon footprint associated with shale gas exploration,” notes Fakir.

According to Fakir, the minister’s report provided further information that indicates a shift from the initial statements on fracking. Some of the more positive aspects of the report, states Fakir, include the licensing process. “This means that it is not a first come, first serve situation.” The report also states that further scientific research needs to be conducted before the mining regulations are amended. Thirdly, although allowance is made for drilling, says Fakir, it is non-intrusive and more focused on prospecting and exploration. Fourthly, the initiative will be monitored. “It all depends on how the project is run and whether the necessary safeguards are in place,” notes Fakir. “However, we still remain sceptical – especially with regard to the current situation in the mining sector,” he says.

According to Fakir, it seems that the government does not have a unified view on hydraulic fracturing. This could be the reason why the report was published after the minister announced that the moratorium on hydraulic fracturing has been lifted. “It seems that there is a strong debate in Cabinet, which might have led to changes being made to the original report,” says Fakir. This means that there still remains room for changing policy.

Fakir states that the public opinion should not be ignored and that public pressure should continue. Moreover, there needs to be “an egalitarian approach” and the process should not be spurred on with outside players who have a vested interest in the project.

“In my personal view, the Karoo has certain constraints, which is why shale gas extraction is not a viable option,” says Fakir. He says Sasol has withdrawn from the project, as the petrochemicals giant shares this sentiment. Other energy options might be more suitable. “There needs to be a Plan B, such as hydropower, more renewables and conventional gas,” he noted.

Full acknowledgement and thanks are given to “The Gas Equation: an analysis of the potential of nature gas industry in South Africa” by PwC, www.shell.com, www.wwf.org.za, the Department of Mineral Resources’ “Executive Summary Investigating Hydraulic Fracturing in the Karoo Basin” and a press release by the Department of Mineral Resources for the information given to write this article.

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