Bloomberg News

South Africa Allows Exploration of Shale Gas Resources

September 07, 2012

South Africa's Energy Minister Dipuo Peters

Energy Minister Dipuo Peters said, “If extraction of the gas can be done safely, let’s go and do it.” Source: South African Government via Bloomberg

South Africa, which has the world’s fifth-largest shale-gas resources, lifted a moratorium on the exploration of natural gas trapped in rock, the mines ministry said.

The government imposed a ban last year on hydraulic fracturing, or fracking, while it studied the environmental repercussions of allowing companies including Royal Dutch Shell Plc (RDSA), Falcon Oil & Gas Ltd. (FO) and Bundu Oil & Gas (Pty) Ltd. to employ the practice. Fracking, which involves blasting water mixed with sand and chemicals underground to free trapped hydrocarbons from shale formations, has been banned in France.

“We need to explore the possibilities of us having a resource of shale gas in the country in order to address our energy needs,” Collins Chabane, the minister in the presidency, said in an interview with Johannesburg’s eNCA television channel.

South Africa, an oil importer that’s threatened by power shortages, has about 485 trillion cubic feet of shale gas resources, according to a study by the U.S. Energy Information Administration that was published last year.

China, the U.S., Canada and Argentina have the biggest shale gas resources, the study shows, and South Africa’s are equivalent to about 7.3 percent of the world total.

Sheep Country

Developing a 10th of South Africa’s resources may boost the economy by about 200 billion rand ($24 billion) a year, a study by Johannesburg-based research company Econometrix Ltd. and commissioned by Shell showed earlier this year.

The resources stretch across the Karoo, an arid area in western South Africa, best known for sheep farming. Shell applied in 2011 to drill 24 wells in 90,000 square kilometres (34,749 square miles) of land in the Karoo.

“South Africa has made a hasty and ill-informed decision about a very unpopular technology,” Jonathan Deal, chairman of Cape Town-based Treasure Karoo Action Group, said in a telephone interview after the decision. “We will oppose the issuance of drilling licenses. If that is ignored, we will proceed with formal litigation.”

Shale gas should contribute to energy production, Energy Minister Dipuo Peters said May 17. “If extraction of the gas can be done safely, let’s go and do it,” she said.

Shale gas “will be instrumental in meeting South Africa’s growing energy demand, while creating sustainable and permanent jobs for South Africans,” Shell said in an e-mailed comment.

To contact the reporters on this story: Franz Wild in Johannesburg at fwild@bloomberg.net; Andres R. Martinez in Johannesburg at amartinez28@bloomberg.net

To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net


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