Shale gas in Karoo ‘can fuel growth’

South Africa is potentially blessed with a multibillion-rand treasure in shale gas buried underground in the vast Karoo, according to a study commissioned by one of the principal potential players in the industry, Royal Dutch Shell.

Speaking at the release of the study on Friday, Econometrix economist Tony Twine estimated that reserves of 485 trillion cubic feet (tcf) of shale gas could be lurking in the Karoo. He glowingly described this as the equivalent of 400 years of oil consumption in South Africa.

Opponents of fracking march in Cape Town last year, but economists say it will be difficult to ignore the benefits of gas. Photo: Brenton Geach. Credit: Independent Newspapers

The report, which assesses the potential macroeconomic benefits of hydraulic fracturing, argues that if there was only 4 percent of the estimated reserve, or 20tcf, it would boost South Africa’s gross domestic product (GDP) by R80 billion and government revenue by R35bn a year. It would create 300 000 permanent jobs.

Hydraulic fracturing, or fracking, is the controversial process of injecting water and chemicals under high pressure into the earth’s surface to extract shale gas.

If these figures proved to be even better, 50tcf would translate into a GDP boost of R90bn. A higher reserve could translate into a R200bn boost or 700 000 jobs in the region, where unemployment is believed to be well over 50 percent.

Jonathan Deal of the Treasure the Karoo Action Group said the fact that the report was paid for by Shell undermined its integrity.

“It is a one-sided and unbalanced document,” said Deal, who has a farm near Molteno and has been fighting against applications by Shell and other multinational companies to prospect for shale gas.

He said an earlier survey finding that 75 percent of South Africans supported fracking was also questionable as it had been paid for by Shell.

In the Econometrix survey, Twine had simply reflected the views of those who were paying him, Deal said.

In reaction Bonang Mohale, Shell South Africa’s chairman, said the majority view would prevail. That, he argued, was the view that fracking should go ahead. “This is probably bigger than the discovery of gold in Gauteng,” he said.

Should fracking go ahead, about $220 million (R1.6bn) would be spent during the first exploration phase, which he said would take place on just 1 percent of the 900 000km2 that the Karoo covers.

Mineral Resources Minister Susan Shabangu’s spokesman was not able to comment at this stage and it is unclear when her moratorium on shale gas prospecting would be lifted.

Twine, who led the research team, said that to walk away from high values like those mentioned in the report “is going to be a difficult decision”.

The economy was heavily reliant on its energy sector and such a large scale development of shale gas would ease the energy deficit, making it cheaper to turbo-charge economic growth and reduce imports of natural gas and electricity.

About 67 percent of current oil consumption was imported and 65 percent of natural gas was piped in from Mozambique, he pointed out.

Econometrix managing director Rob Jeffrey acknowledged environmental concerns around fracking in other parts of the world, including the US, but he believed that the risks would be taken into account. The purpose of the report was to quantify the potential worth of shale gas in the Karoo.

Former ANC Western Cape leader Chris Nissen, a spokesman for the Karoo Shale Gas Community Forum, said the organisation told National Planning Commission hearings that there was a plethora of legislation to ensure proper monitoring and compliance “with regard to the environment”.

Shale gas extraction was needed “to defeat and destroy poverty… not to destroy the environment”, Nissen said.

Supporters of extraction have focused on the industrial, commercial and domestic fuel use of the natural gas. It can be converted into liquid fuels and burned to generate electricity. - Sungula Nkabinde and Donwald Pressly