Falcon Oil and Gas Ltd.

by Siseko Njobeni, 18 September 2012, 07:32

BusinessDay

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SHALE gas could provide an affordable feedstock for cleaner-burning gas-fired power plants in the country "if managed effectively and responsibly", consultancy Frost & Sullivan has said.

The government’s recent lifting of a ban on shale gas exploration in the Karoo has revived the contentious debate in SA.

In a new study, Frost & Sullivan points out the effect of shale gas in other parts of the world. Newly discovered shale gas reserves around the world were likely to promote consumption of gas as both an energy source and an affordable feedstock for a wide variety of chemicals and materials, Frost & Sullivan analyst Michael Mbogoro said yesterday.

The hydraulic fracturing chemicals market was expected to grow about 10% a year through to 2020, the firm said.

If managed effectively and responsibly, shale gas could provide an affordable feedstock for cleaner-burning gas-fired power plants in SA, Frost & Sullivan energy and power industry analyst Dominic Goncalves said.

"Although this development will fall outside of SA’s current critical electricity supply, shale gas as a feedstock post-2020 could become a complementary electricity source with renewable energy, as the country weans itself from coal," he said.

In a report earlier this year, Econometrix said shale gas was ideal for peak-load electricity generation. The US Energy Information Administration says SA has about 485-trillion cubic feet of technically recoverable shale gas resources, most of which are in the Karoo basin, which makes the area the fifth-largest shale gas field in the world, according to Econometrix.

With the moratorium lifted, exploration and pilot studies will soon be under way, although commercial development could take seven to nine years.

The rapid development of shale resources is set to dramatically change energy assets globally, Mr Mbogoro said.

Sasol CEO David Constable last week said the shale gas boom presented the company with a unique opportunity. He said that by 2030, growth in gas production could rise by about 40%, followed by a 60% increase in associated liquid fuels production.

"Sasol, as we stand here today, is in a position to benefit from both developments because, number one : our (gas-to-liquid) value proposition benefits from increased gas volumes, better discount to an improving oil price, and creating arbitrage for double-digit returns.

Mr Constable said Sasol was also keen to consider the potential of shale gas in the Karoo.

"We are keen not only to review those findings but to also evaluate the potential of producing large quantities of shale gas in an environmentally friendly fashion here in SA," he said.

Countries such as SA offered exciting opportunities for the development of shale gas markets, Frost & Sullivan said.

The lifting of the ban on shale gas exploration has raised the ire of environmental organisations that still have concerns about fracking, or hydraulic fracturing.