Bloomberg News

S. Africa Shale-Gas Permits Unlikely in 2013 on Appeals

April 16, 2013

Explorers including Royal Dutch Shell Plc (RDSA) are unlikely to get hold of shale gas permits in South Africa this year because of potential legal appeals, according to law firm Bowman Gilfillan.

“Certainly it’s unlikely to be before the end of the year,” Megan Adderley, an associate at the Johannesburg-based law firm, said in a phone interview. “Environmental groups will move to block this as soon as the government acts. The process of challenges could last for some time.”

South Africa in September lifted a moratorium on hydraulic fracturing, or fracking, which uses a large volume of water pumped underground to help extract shale gas, to assess the area known as Karoo. Shell in 2011 applied to drill 24 exploratory wells in the arid area of western South Africa. The Karoo may hold 485 trillion cubic feet of shale resources, U.S. Energy Information Administration data show.

A taskforce of government agencies including the Department of Mineral Resources, or DMR, is studying best practice on fracking and plans to complete a draft by July, to be followed by public consultation, Adderley said. Landowners and other environmental groups will move to block the granting of exploration licenses, she said.

“The hydraulic fracturing monitoring committee which is an inter-departmental body has been established and is in the process of augmenting the regulations,” said Trevor Hattingh, a spokesman for the Department of Mineral Resources, in an e-mail response to questions.

Second Half

Falcon Oil & Gas Ltd. (FO), which was granted a technical cooperation permit in 2009 for 7.5 million acres, expects exploration to start in the second half of 2013, according to a company presentation last week. Chevron Corp. (CVX:US) has teamed up with Falcon on the project.

Philip O’Quigley, chief executive officer of Falcon, didn’t immediately return an e-mail seeking comment.

An environmental group opposed to fracking in the region said it will challenge licenses.

“They know they are on very, very weak ground,” said Jonathan Deal, chairman of Treasure the Karoo Action Group.

An appeal is ready to move that addresses economic, environmental and social issues against exploration, said Deal by phone from San Francisco where he is to receive a Goldman Environmental Prize for activism.

“A decision to allow the use of hydraulic fracturing will only be made after the promulgation of necessary regulations,” Hattingh said. “The process of compiling regulations is aimed at ensuring that environmental concerns are addressed.”

South Africa is “stringent” in granting exploration licenses, Bonang Mohale, chairman of Shell’s South Africa unit, said April 11 at a gas conference in Johannesburg. The company has committed to the full disclosure of chemicals and will not compete for water in the Karoo, he said.

To contact the reporter on this story: Paul Burkhardt in Johannesburg at pburkhardt@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net


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