SOUTH Africa is on the verge of a "golden age" in energy in respect of the exploration being carried out in shale gas, and onshore and offshore oil. But Transport Minister Dipuo Peters says the Department of Energy will only announce the work it is doing in this regard, "when they are ready".
This sounds a lot like the "unknowns" surrounding costs, funding and development of South Africa’s officially touted nuclear build.
Business has largely applauded the significant renewable energy contracts that have been rolled out by the department. But questions remain about the potential role of shale gas in South Africa’s energy mix. This is especially in relation to "non-polluting" base-load nuclear energy, and South Africa’s commitments to reducing carbon emissions.
The South African Institute of Race Relations says new research shows South Africa needs new generating capacity of about 4,800MW "every five years for the next 20 years". That is another Medupi and Kusile every decade. But the potential costs should shale gas be used to provide for this need are not remotely quantified, and experts say legislation on the industry is "vague and unclear".
Amendments to the Mineral and Petroleum Resources Development Act will have a "chilling effect" on South Africa’s nascent oil and gas sector, according to the Offshore Petroleum Association of South Africa.
The first allows the state a right to a 20% free carried interest in all new exploration and production of oil and gas. The second amendment says in addition to the free carry, the state is "entitled" to further participation of up to 80%.
But law firm Webber Wentzel says in a mining and energy alert released last week that further participation is "apparently unlimited" in such projects.
Hydraulic fracturing, or fracking, sounds like a dirty word to some interest groups. Not least the world’s green lobbies, and more specifically, to local action groups that want to ban fracking in South Africa’s Karoo region.
Fracking is not new — it dates back more than 100 years. According to US energy company Halliburton, over the past 60 years fracking has helped deliver trillions of cubic feet of natural gas to American consumers, with more than 1.1-million separate wells drilled during that time.
But there are significant questions over the cost of turning this into base-load supply, which is what South Africa needs to help industry grow the economy.
Halliburton pioneered the scaling of this process to industrial levels in the late 1940s. But oil and gas is by its nature a "dirty" business. More recently, Halliburton has been negatively associated with former US vice-president Dick Cheney and the invasion of oil-rich Iraq. It is also negatively associated with the Deepwater Horizon oil disaster in the Gulf of Mexico, involving BP.
To this end, one is reminded of the strategic role of oil and gas in the global economy, the volatility of the Middle East, and the fact that since 2003 the US has moved fast down the road towards greater energy self-sufficiency by exploiting shale gas.
Quite apart from the contentious claim that fracking causes earthquakes, the primary worry of antifracking and other concerned groups is the pollution of local and regional groundwater.
But with Eskom’s latest power emergencies, it appears that the government is intent on pursuing energy from shale gas. However, fracking opens up numerous questions about other energy sources in respect of optimising South Africa’s socioeconomic growth.
There are opportunities provided by the renewed interest in South African offshore oil and gas, and perhaps more pertinently, the activity in Mozambique.
Along with nuclear energy, these options are far cleaner than burning coal. South Africa is among the worst offenders globally in per-capita carbon emissions.
The country is already heavily involved in the Mozambique gas sector through domestic companies such as Sasol. So why would South Africa pursue fracking in the Karoo, when Mozambique may be in line for a gas boom that surpasses that found offshore in Angola?
At this point, issues around independent power producers come into the picture. Hard questions need to be asked about South Africa’s corporate entities becoming independent providers of power.
Sasol has fairly recently commissioned a gas-cycle turbine fed from Mozambique’s gas fields. This will help it cut its carbon-dioxide emissions by a further 1-million tonnes a year. The global synfuels group now has self-generated power capacity of 60%, easing its reliance on the national grid.
The private sector has expertise and money to change the energy equation in Southern Africa, but is largely prevented from doing this by red tape.
Eskom has proven that relying on a single central power producer in this country is a highly risky game. But fears about market-related power production bring back memories of the financially and morally bankrupt US energy company Enron. Its business improprieties were responsible for the near shutdown of California’s electricity grid in 2000 and the demise of one of the world’s former Big Five accounting firms, Arthur Andersen.
So, too, there are fears that independent production will mean only the interests of the bottom line are met. The government and other interested parties in South Africa are concerned that millions of marginalised families will continue to be ignored or underserved. To this end, there is little doubt that only by working together can the government and private enterprise resolve the problems that insufficient energy generation cause, such as severely limiting socioeconomic growth. But the primary issue remains whether this country can cost-effectively — and by using international best practice — wean itself off its reliance on "dirty and polluting" coal-fired energy, without creating substantial other environmental problems such as widespread pollution of underground water resources.
Recent reports state that fracking for shale gas is not necessarily as bountiful as first suggested. Oil and gas exploration regulator the Petroleum Agency of South Africa recently told Parliament it estimates the Karoo’s shale gas reserves to be 40-trillion cubic feet. This is about a 10th of the original estimate made by the US Energy Information Agency.
This is still considered to be commercially viable, but it highlights the dangers of building skyscrapers out of sand.
Meanwhile, South Africa says its energy plans are in compliance with its promise to reduce greenhouse gas emissions 34% by 2020.
The US Environmental Protection Agency says the burning of natural gas, compared with average air emissions from coal-fired generation, produces half as much carbon dioxide, less than a third as much nitrogen oxides, and 1% of sulphur oxides. This is a considerable reduction.
But at the request of the US Congress, the agency is conducting a study to ascertain the effects of fracking on drinking water resources.
The US megacity Los Angeles is taking steps towards a ban on fracking, and the European Union is busy arguing about this practice in the context of global warming.