Long wait for shale gas boom

Donwald Pressly

The first commercial exploitation of shale gas in the Karoo was likely to take up to 10 years to come to fruition and only if exploration licences were provided to the interested parties reasonably swiftly, Shell South Africa upstream general manager Jan Willem Eggink said yesterday.

At a briefing to journalists on the road ahead for the shale gas industry from the perspective of Shell, which has applied for exploration rights in three major areas of the Karoo, Eggink said once the exploration licences were provided it would take up to two years for the environmental impact assessments to be carried out. This would be done by independent parties subject to a tender process.

The next step would be to drill exploration wells. At this stage Shell planned to bring in six drilling rigs, but it could raise that to 24 over time.

Approached for comment last night, deputy director general of mineral policy and promotion Mosa Mabuza did not shed light on when the new licences would be announced. He asked that a formal request about the timing of the licence announcement be put to the ministry, to which he would speedily respond. “We have these processes inside the department,” he said.

Mineral Resources Minister Susan Shabangu lifted the moratorium on shale gas exploration last year after a multi-departmental study was carried out on the challenges posed by this form of energy extraction.

Eggink said the National Development Plan had focused on South Africa’s challenges, including inequality, poverty and education standards “but energy is an important one [focus of the plan] as well. If a country has security of [energy] supply it can attract new industries, it can attract new jobs.”

Noting that an Econometrix report had suggested that shale gas extraction in South Africa could create anything up to 700 000 jobs “across the chain”, including in the service industries associated with it, he said this was based on assumptions that a significant resource was available for extraction. However, without the exploration process not having begun “we just don’t know” how much gas there is underground.

Eggink believed there was much opportunity in the long term for beneficiation, such as providing the required grade of steel used in the steel casings of the shafts. There were also opportunities for the cement industry to provide the required grade of cement to encase the shafts.

He acknowledged that in the early phases of the development of the industry, including the exploration phase, there would not be significant new jobs. The companies involved in gas exploration would employ some skilled people. It was likely that there would be spin-offs for jobs only in the build-up to the extraction phase.

Opportunities for black economic and community empowerment in the Karoo would only begin once the exploration phase was over, Eggink said, as this phase required large sums of capital investment. It was not a profit-making phase.

Graeme Smith, the Anglo-Dutch company’s vice-president for exploration and new ventures, said there could be significant opportunities for the conversion of gas to petroleum.

South Africa imports the bulk of its liquid fuel requirements.