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Southern Africa looks to CBM

Region’s CBM reserves could be “tens of trillions of cf”; South Africa steps up shale-gas hunt

IN A REGION prone to energy shortages, southern African governments, watching the success of unconventional-gas developments elsewhere in the world, are increasingly eager to highlight their own resource potential.

Mozambique is the latest nation to throw its hat into the ring. Nelson Ocuane, chief executive of state-owned Empresa Nacional de Hidrocarbonetos told a conference in Cape Town this month that the country could have coal-bed methane (CBM) potential of “well above” 1 trillion cubic feet (cf). He said he hoped to interest coal producers already active in the country, such as Australian-registered Riversdale and Vale, in their development.

Southern Africa is one of the few areas in the sub-Saharan region to offer the right conditions for CBM exploitation, given an abundance of coal reserves, the presence of a large market in South Africa and access to that country’s well-developed financial markets to bring in investment. Companies are already exploring in Botswana, Zimbabwe and South Africa – specifically, the huge Karoo basin coalfields.

Little concrete evidence

But while some of the region’s leaders have claimed their countries could be sitting on tens of trillions of cf of exploitable CBM reserves, there is little to back up such estimates so far. Nevertheless, even a few trillion cf could provide feedstock for much needed new power capacity, or industrial uses.

Botswana is pushing ahead faster than its neighbours. A number of companies are exploring in and around its main coal reserves in the Kalahari Karoo basin. The projects are at the exploration stage, but there are signs that at least one could come to fruition. South African miner Exxaro says CBM from its project could feed 80-100 megawatts (MW) of new power capacity to be built in Botswana, possibly by 2013.

The project is a joint venture with local Kalahari Energy (KE), which heads a group that won a tender in July 2008 to build an independent power project (IPP) in the country. The idea is that the proposed 250 MW IPP, near Orapa, would eventually be powered by CBM alone, with diesel used as an interim fuel source while gas infrastructure is developed. Around 110 km of pipelines would be required to connect the power station to the gas reserves.

In July, KE estimated gas in place in its five prospecting permits, covering nearly 4,000 square km, added up to around 8.36 trillion cf. The project has benefited from an $8.5m investment guarantee, provided by the US Overseas Private Investment Corporation, to fund the cost of drilling and equipment.

If the IPP materialises, it will be part of a push to add power capacity in a country prone to electricity shortages and blackouts. Analysts estimate there could be enough CBM in Botswana to feed as much as 1 gigawatt of generating capacity, although they caution that forecasts are highly approximate at this early stage of exploration. But Botswana is not reliant on CBM for power – a Canadian-Chinese consortium said recently it was planning a 300 MW coal-fired power station by 2013. It could prove to be the first privately funded power project in the country in recent years.

However, despite the need for power, the CBM sector remains fragile both in Botswana and the region generally. It cannot count on the factors at work in major CBM provinces such as Queensland, in Australia, where a big domestic market is complemented by the potential for lucrative liquefied natural gas exports.

Saber Energy, another Botswana CBM explorer, collapsed last year having run into financial difficulties, leaving the KE-Exarro venture as the country’s only active project. Saber’s CBM assets are now being restructured. Earth Heat Resources, an Australian firm with geothermal-power interests in Africa and elsewhere, said earlier this year that it might now engage in CBM exploration in Botswana.

Zimbabwe also has CBM potential. The government said in January it planned to invest $450m in a long-mooted CBM gas project in Lupane that would be capable of supplying a 300 MW power development. But continuing political uncertainty is likely to hamper CBM development for the moment.

South Africa: CBM and shale

Interest in CBM in South Africa is growing, according to the energy ministry, although no concrete plans have yet emerged. Earlier this year, upstream regulator Petroleum Agency SA said around 40 CBM exploration licenses had been approved, mainly in the Mpumalanga and Gauteng regions. The last large CBM studies in the country were carried out in 2006 by the Anglo Coal subsidiary of Anglo American. They suggested the Waterberg region could hold over 1 trillion cf of extractable gas.

South Africa’s unconventional energy sources also extend to shale gas, a sector buoyed by successful developments in North America. Shale resources are concentrated in the Karoo basin, where Shell and US-firm Falcon Oil and Gas are engaged in a year-long study of prospectivity. They are due to report in early 2011 and will have first option to explore. Others to have registered interest in acquiring permits include Anglo American and a group comprising Sasol, Statoil and US firm Chesapeake.

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