Environment concerns: Exploration for shale gas in the Karoo that would involve hydraulic fracturing or fracking is contentious. Environmental damage worries are being weighed against potential economic benefits. Shale gas resource estimates have been updated. SUPPLIED
Environment concerns: Exploration for shale gas in the Karoo that would involve hydraulic fracturing or fracking is contentious. Environmental damage worries are being weighed against potential economic benefits. Shale gas resource estimates have been updated. SUPPLIED

The Petroleum Agency SA (Pasa) has reviewed feedback from public consultations and scientific reports on shale gas and is on the verge of making recommendations on granting exploration licences, David van der Spuy, the agency’s manager for resource evaluation, says.

Exploration for shale gas in the Karoo, which would involve hydraulic fracturing, or fracking, is contentious because concerns about environmental damage are being weighed against the potential economic benefits.

Van der Spuy told a South African Oil and Gas Alliance event on Tuesday that Pasa had updated the estimate of SA’s potential shale gas resource to 201-trillion cubic feet. Mossgas operated for decades on a 1-trillion cubic feet resource.

The moratorium on granting new shale gas exploration permits remained in place and the first three permits granted to previous applicants Shell, Falcon and Bundu did not permit hydraulic fracking, he said. Those permits only allowed seismic and exploratory drilling.

Asked what oil and gas prices would be needed to make shale gas exploration viable, he said it depended on the conditions. For US shale gas producers, where infrastructure is in place, an oil price above $50 a barrel spurred new activity but in SA, where the resources were unknown and infrastructure and skills were lacking, a higher incentive price was needed. Although global gas prices tracked oil prices to some extent, South African gas would probably be priced in relation to competing energy sources.

Pasa has also granted onshore permits for biogenic gas and coal-bed methane extraction. Offshore on the West Coast Shell International and BHP have relinquished deepwater exploration rights. New applications for those rights were being considered, Van der Spuy said.

Africa Energy Corporation, a subsidiary of Lundin, has found oil in its Block 2B. The most advanced project in the area was the Sunbird/Umbono Ibhubesi gas field. Sunbird Energy chairman Kerwin Rana said Eskom’s Ankerlig power station, which is being converted to use gas, remained a key potential customer. Sunbird was considering other potential customers.

Van der Spuy said Mossgas operated about 20 wells off SA’s southern coast, including the F-O gas field, which is now delivering in line with predictions, although it was initially disappointing. Total, which started drilling a 1,300m deepsea exploration well in 2014 and halted work for technical reasons, recently took an additional permit area.

It would resume work on its first area in 2018-19.

Van der Spuy said some of the challenges hydrocarbon explorers in SA faced included the slump in oil prices, which were slowly recovering; uncertainty around the promulgation of amendments to the Mineral and Petroleum Resources Development Act; lack of infrastructure, which rendered small discoveries uneconomical; uncertainty over the government’s plan for gas; and public concerns over fracking.

Companies were forming partnerships and limiting their work programmes to reprocessing old data.

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