The 2011 KPMG Energy Survey found that solar and wind are still significant investment areas
(31 percent and 25 percent respectively), but the investment in shale gas increased significantly from a percent of respondents in 2010 to 44 percent in 2011. Nearly two-thirds (62 percent) of respondents believe that shale gas will transform the world’s energy needs.
Exploration efforts are fuelled by the security of supply. Countries that historically depend on importation of energy sources view shale gas as their solution to energy independence. In addition, although shale gas is classified as fossil fuel, it is perceived to be cleaner than other ‘dirty’ fossil fuels, such as coal and oil.
A recent study assessed 48 shale gas basins in 32 countries and ranked the size of the each country’s shale gas deposits. Total reserves were estimated at 6 622 trillions of cubic feet. South Africa was rated in fifth place, owning 7.3% of proven global reserves.
South Africa was placed into a group of countries that depend heavily on natural gas imports but have some gas production infrastructure. The estimated shale gas resources are substantial relative to the current gas consumption. For these countries, shale gas development could significantly alter their future gas balance, which may motivate development.
Over the past decade, the combination of horizontal drilling and hydraulic fracturing or ‘fracking’ has allowed access to large volumes of shale gas that were previously uneconomical to produce. Fracking is a technique to extract shale gas from deep underground by pumping a pressurised mixture of water, sand and chemicals down drill holes.
However, this technique can affect the environment in terms of groundwater contamination, which leads to gas bubbling out of riverbeds, chemical-filled tap water, gas going up water taps and air pollution.
In 2009, the South African National Oil Company (PetroSA) announced that it is considering building a 400 000 bl/day crude refinery at Coega. The depleting feedstock for its Gas-to-Liquid (GTL) plant in Mosselbay has been an issue and forced PetroSA to look elsewhere to ensure supply. In December 2010, a consortium led by Royal Dutch/Shell applied for a licence to engage in shale gas exploration and production activity in the Karoo.
To date, PetroSA has not committed to a timeframe for its new Coega crude refinery and scaled back on its anticipated capacity. The debate is now whether the exploration of South Africa’s shale gas resources has anything to do with the Government’s lack of commitment to building the Coega refinery. Otherwise the Government may be assessing the feasibility of using shale gas as feedstock to their existing GTL plant in Mosselbay.
In an interesting twist, after an outcry from the public and environmentalists, Government placed a moratorium on ‘fracking’ in the Karoo in April 2011.
What is certain is that energy security and delivery will be interesting to watch – locally and globally.