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Exploration boost for South African shale

National Planning Commission (NPC) recommends shale-gas development

Support for further shale-gas exploration in South Africa has come from a government commission. It will draw up a 20-year economic plan for the country, improving prospects that drilling will be allowed once a moratorium lifts in February.

In its national development plan, published on 11 November, the National Planning Commission (NPC) said shale-gas development should be permitted if environmental-impact studies show it to be safe. “If gas reserves are proved and environmental concerns alleviated, development of these resources and gas-to-power projects will be fast-tracked,” the report said. It is now being submitted to cabinet for approval.

The government imposed a moratorium in April, then in August extended it until end-February 2012, while a task force considers the benefits and disadvantages of shale exploration. 

A switch to gas-fired power from more-polluting coal – which makes South Africa one of the world’s largest per-capita carbon dioxide emitters – would help control the size of the country’s carbon footprint.

But these advantages are being weighed against concerns that shale-gas operations could cause environmental damage in the Karoo basin, a 90,000 square km area where most of the country’s shale-gas resources are located. Much of the Karoo is agricultural land or semi-arid wilderness with little permanent water – essential for hydraulic fracturing (fracking).

Companies including Shell, Statoil, Chesapeake, Sasol and Falcon Oil and Gas have all carried out desktop studies of South Africa’s shale-gas potential, but if they want to drill they must show they can do so without contaminating water supplies or depleting the water table, which would probably mean importing water from elsewhere.

If the firms can persuade the government they can drill safely and in an environmentally sound manner – and convince themselves that the economics stack up – then exploration could start soon, given the country’s limited domestic energy-supply options.

A less-expensive alternative

“The NDP is a long-term plan, but as power supply is crucial in South Africa and to ensure electricity prices remain competitive, all avenues must be explored,” said Gareth Blanckenberg, a South Africa-based energy analyst at consultancy Frost & Sullivan. “The addition of large amounts of renewable energy infrastructure has a cost implication and need not be pursued if there are less-expensive alternatives, such as shale gas.”

The NPC said allowing exploration would be the best way to delineate the Karoo’s shale reserves. While the US Energy Information Administration (EIA) estimates there could be up to 485 trillion cubic feet of shale gas in South Africa, other estimates are much lower. But none of these estimates are as accurate as those that would come from drilling.

One of the first firms out of the blocks is likely to be Shell. Jan-Willem Eggink, general manager of upstream ventures for Shell's South African unit claimed in September that the country’s shale-gas reserves could total at least half the EIA’s figure, making them commercially viable. He said Shell was considering investing $200 million in Karoo exploration if it received the go-ahead. Shell would drill at least six wells in a first three-year licence period and then up to many as 24 more if initial results warranted it.

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