The proposed amendments to the Gas Bill would open the gas industry and include a platform for the potential development of South Africa’s much-contested shale gas resource.
Department of Energy (DoE) chief director of hydrocarbons policy Muzi Mkhize said on Thursday that the draft Gas Amendment Bill aimed to include regulations governing unconventional gas.
Unconventional gas in South Africa was experiencing rapid development, and with the country’s diminishing conventional gas resources, shale gas could play a valuable role if it could be extracted without harming the environment.
South Africa was said to have the fifth-largest shale gas resource globally with 485-trillion cubic feet (tcf), behind only China, which had 1 275 tcf, the US with 862 tcf, Argentina holding 774 tcf and Mexico with 681 tcf.
Analysts had previously disputed this, with Frost & Sullivan energy and power systems industry analyst Dominic Goncalves telling Engineering News Online in January that, if the resources were broken down and extensive exploration undertaken, it was likely that South Africa would only produce a supply of about 10 tcf to 50 tcf of commercially viable shale gas.
However, Mkhize said that, even if only 10% of the estimated and widely-quoted, technically recoverable reserves of the Karoo basin, in the Northern Cape, were available, it would be a “game changer” for the gas industry.
He pointed out that one-trillion cubic feet of visible shale gas was sufficient to launch Petroleum Agency South Africa’s (Petro SA’s) gas-to-liquids project, in Mossel Bay, which provided 5% of the national demand for liquid fuels and created in excess of 1 500 jobs.
As a feedstock for electricity generation, shale gas could also fill a gap in terms of the Integrated Resource Plan 2010’s aim of having an electricity mix that included 14% gas.
Shale gas could also boost South Africa’s economy, while reducing the nation’s dependence on fossil fuels.
He pointed to a interdepartmental investigation last year into the hotly contested matter, which showed that if a moderately optimistic 30 tcf were produced at $4 per thousand cubic feet of gas and an exchange rate of R8 per US dollar, the gross sales value would be almost R1-trillion.
Current industry estimates of the cost of extracting shale gas in South Africa – a stage of development that would take about seven to ten years to reach – were between $9 and $16 per million British thermal units.
An earlier Econometrix report indicated a potential R80-billion contribution to gross domestic product and the creation of about 293 000 direct, indirect and induced jobs, based on a 20 tcf recoverable resource.
But the correct supporting legislation and policies were required to sustainably develop the industry, while mitigating any negative impacts, including environmental damage.
Mkhize noted that the formation of a monitoring committee was required to create the regulatory environment to explore and exploit shale gas in an environment-friendly manner.
It would also be required to review the existing regulatory framework to identify any shortfalls or omissions and to ensure that it was sufficiently detailed and specific.
The investigative working group, led by Petro SA CEO Nosizwe Nokwe-Macamo, comprised representatives from the departments of Water and Environmental Affairs, Science and Technology, Energy and Mineral Resources, as well as the Petroleum Agency of South Africa, the Council for Geoscience, SKA South Africa, the Water Research Commission and Eskom.
The study evaluated the potential environmental risks posed by the process of hydraulic fracturing, as well as the negative and positive social and economic impacts of shale gas exploitation.
The DoE had reviewed the Gas Act in an attempt to close “gaps” in the framework and deal with compliance issues. It also aimed to widen the role the National Energy Regulator of South Africa would play in monitoring and enforcing compliance.
The DoE planned to submit the Act to Cabinet for approval before the financial year-end.
The window period for the submission of comments remained open until July 1