Report indicates that fracking in Karoo is unlikely
There is little chance of fracking in the Karoo within the next decade, if ever, BMI Research said in a report released on Tuesday morning.
BMI’s conclusions are based on a Council for Scientific and Industrial Research (CSIR) study that found the proponents of Karoo fracking had overstated local socioeconomic benefits while downplaying key technical problems — not least that shale gas is a highly water-intensive business and the region is drought stricken.
Minerals and Energy Minister Mosebenzi Zwane appeared to have ignored the CSIR’s warnings when he recently announced that government policy would make provision for energy companies to start prospecting for shale gas in the Karoo Basin.
But according to BMI, environmentalists have little to worry about because only major players would have the technical expertise or capital to develop fracking in the Karoo, and they were not interested.
"For example, Royal Dutch Shell, which pulled back from its plans for shale gas exploration in SA in 2015 and has indicated that an oil price in the higher range of $60-$80 a barrel — coupled with significantly more attractive fiscal and licensing terms — would be needed for the company to resume its operations," the note said.
Along with continued regulatory uncertainty, BMI listed water scarcity, lack of infrastructure, geological complexity and environmental opposition as other reasons Karoo fracking was unviable.
But the main obstacle is that serious players with the money and expertise to develop a shale gas industry in the Karoo are not interested.
"The majority of firms committed to exploration are smaller companies with more limited technical and financial capabilities. The experience and capital of the majors would be needed to speed progress. At a time where majors’ capex spending has been slashed in light of constrained oil price, the likelihood of investment into high-risk frontier shale plays is significantly reduced," the report said.