Falcon Oil and Gas Ltd.

Meet face-to-face with Minister Mosebenzi Zwane.

Meanwhile the "backroom boys" fruitlessly attempts to pilfer from the long-term investors.

• 27th January, 2016 •

Image: Minister Mosebenzi Zwane with South Africa’s President Jacob Zuma

Holding the world’s 5th largest shale gas reserves, South Africa has a lot to gain from exploring its unconventional potential – according to the country’s Minister for Mineral Resources Mosebenzi Zwane. Speaking during a community gathering in Cradock, in Eastern Cape Province, last Thursday, Mr Zwane argued that shale development would boost South Africa’s business development within communities, establish black industrialists, create employment and develop specialised skills and the youth.

“Currently South Africa is a net importer of energy sources such as crude oil, refined petroleum products and natural gas. It is estimated that the Karoo shale gas resources would mean South Africa has the fifth largest reserves, estimated at 485 trillion cubic feet (tcf).

“We, however, take a conservative view of a 30 tcf economically recoverable resource, which is equivalent to 30 times the size of the Mossgas (Mossel Bay gas field) plants.”

South Africa has the world’s ninth-largest amount of recoverable coal reserves and holds 95 percent of Africa’s total coal reserves. It is no surprise then, that the country has a large energy-intensive coal mining industry along with a sophisticated synthetic fuels industry, producing gasoline and diesel fuels from the Secunda coal-to-liquids (CTL) and Mossel Bay gas-to-liquids (GTL) plants.

Despite it’s rampant coal production – 25 percent of which gets exported to countries like India – South Africa imports natural gas from Mozambique via pipeline to supply Sasol’s Secunda CTL plant and to fuel some gas-fired power plants. South Africa produces a small volume of natural gas offshore, and it is mainly used to supply the Mossel Bay GTL plant.

This could all potentially change quite dramatically if the country commits to developing its shale gas resources.

Speaking to Money Web back in November, Robert Willes, managing director of Challenger Energy, whose subsidiary Bundu Gas and Oil Exploration was the first company to apply for shale gas exploration rights in South Africa’s Karoo dessert, said that low oil prices are likely to do little to dissuade the country from exploring its shale potential.

“Firstly, the exploration and appraisal phase of the project is expected to take a number of years, during which the longer-term oil price scenario is likely to become clearer; secondly, in the interim, the cost of exploration may be reduced as oilfield service companies become more competitive; and thirdly, we expect that a substantial proportion of the market for shale gas in South Africa is likely to be for power generation,” he explained.

In September, a report by McKinsey & Company also made a case for South African shale gas arguing that adding natural gas to the country’s coal-dominated energy mix could solve an emerging energy supply gap that the country is likely to face after 2020.

According to the report, South Africa is expected to face a power shortage of up to 10GW by 2025, as nearly 14GW of ageing coal plants will be decommissioned between 2020 and 2030 and as energy consumption continues to grow. However, with the introduction of natural gas into the energy mix, the country could gain 20GW of gas-fired power generation capacity, to provide flexibility to at least 10GW of renewables capacity and creating demand for 28.3bn cu/m of gas annually.

It is exactly these energy supply pressures that South African government needs to remedy, and Minister Zwane is convinced that the country’s rich shale reserves are part of the remendy to the problem.

“We have taken a decision to diversify our energy basket in our pursuit to provide not only cost-competitive energy security, but also significantly reduce the carbon footprint and drive our industrialisation and beneficiation programme to grow the economy inclusively in order to create a critical mass of employment, amongst others,” he said, adding:

“It is my firm belief that the excitement we have about the discovery of this resource (shale gas) needs to be shared and also enjoyed by communities.

“In this regard my department has devised a promotional programme through which the public and especially communities that are close to the proposed development are educated and informed about these developments.

“This will ensure that communities are kept up to date about the exploration method and benefits that can be realised from the exploitation of shale gas and informed about the mechanisms and instruments that seek to augment existing laws for the protection of water resources and for the protection of the environment” he concluded.