South African Shale Exploration Awaits Regulations

The U.S. Energy Information Agency estimates that South Africa is the eighth-largest holder of technically recoverable shale gas resources in the world. However, environmental concerns led South Africa's government to place a moratorium on shale gas exploration from April 2011 to September 2012. In October 2013, the government proposed new regulations to govern the exploration of shale resources, and since then international energy companies have been waiting to be issued licenses for shale exploration.

RICH BUT LIMITED RESOURCES

South Africa has a large energy intensive coal mining industry but limited oil and natural gas reserves and the country imports natural gas from Mozambique via pipeline to supply Sasol's Secunda CTL plant. The country has already used its large coal deposits to meet most of its energy needs. When in 2011 the Shell explored and developed natural gases through hydraulic fracturing technology in the region of Karoo, a new energy perspective appeared, along with serious environmental risks. Mineral Resources Minister Susan Shabangu said in a statement, "Not only does the potential of shale gas exploration and exploitation provide an opportunity for us to begin production of our own fuel, but it also marks the beginning of the re-industrialization of the South African economy.”

Environmental concerns regarding water usage and hydraulic fracturing, which is one of the processes used to facilitate the extraction of shale gas, led the government to enact a moratorium in April 2011 on permitting new exploration licenses for shale gas exploration, based on recommendations from the country’s Department of Mineral Resources. One year later, the South African government lifted the moratorium after a study recommended that it was safe to continue shale gas exploration. This was a government-funded study and its objectivity remains doubtful.

KAROO REGION

South Africa's shale gas resources are located in the Karoo basin in the Whitehill, Prince Albert, and Collingham formations. The sparsely populated Karoo region is renowned for its rugged scenery and is home to the rarest mammals in the world - hence why this basin was the first place in South Africa where environmentalist concerns were raised.  

Shell, Challenger Energy subsidiary Bundu Gas & Oil Exploration, Falcon Gas & Oil (in partnership with Chevron), Statoil and Chesapeake have all applied for shale gas exploration licences for the Karoo basin, to be issued by the South African Department of Mineral Resources.  Petroleum Agency South Africa has already issued these companies technical cooperation permits (TCPs). The TCP authorizes short term research into shale gas potential but is open to revision after the new regulations are decided. International energy companies interested in South African shale are awaiting  the new regulations, and hope to get the approval to convert their TCPs to exploration licenses. To mitigate concerns over water usage, the government requires shale gas developers obtain permits for sourcing and discharging water from the Department of Water Affairs, according to the Oil and Gas Journal.

NEW REGULATION

In October 2013, South Africa's cabinet proposed new technical regulations to govern petroleum exploration, particularly standards for shale gas exploration and hydraulic fracturing. This was considered an important step in opening up an industry that could provide new energy supplies for South Africa. Shabangu stated in an interview regarding the Karoo region that the new technical regulations would provide for the protection of water resources, which is the main issue for that region as its semi-arid qualities.

PetroSA LNG terminal

Although parliament has not yet ratified the new regulations for exploration and development, South Africa’s state-owned oil company PetroSA plans to invest in an LNG terminal on the south coast, 400 kilometers west of Cape Town, at an approximate cost of 510 million USD.  For this project PetroSA has already contracted WorleyParsons Ltd., Australia’s largest oil and gas engineering company, to conduct a front-end engineering design study. A final investment decision is due in the fourth quarter of 2014, and the project will be handed over by contractors to PetroSA in the first three months of 2018