S.Africa circles back to shale gas as power crisis drags

Challenger Gold

18/05/2023 09:24

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      New Karoo shale gas blocks to be auctioned
    

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      Shell's acreage part of bid round
    

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      Active petroleum systems with oil, gas seeps
    

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      Farmers, activists fret over fracking
    

  
    By Wendell Roelf
       CAPE TOWN, May 18 (Reuters) - South Africa will auction
at least 10 new onshore blocks for shale gas exploration in the
environmentally sensitive Karoo region, a government official
told Reuters, as the country eyes alternative energy sources to
ease its worst-ever power crisis.
    South Africa's first competitive auction for oil and gas
resources, expected in 2024 or 2025 once legislation making
provision for the bid round is passed, includes acreage once
held by Shell  SHEL.L .
    "We are potentially looking at a minimum of about 10 shale
gas blocks in the Karoo that will be released through
competitive bidding," Bongani Sayidini, chief operating officer
at the Petroleum Agency of South Africa (PASA) said.
    PASA estimates the Karoo Basin holds around 209 trillion
cubic feet (tcf) of technically recoverable shale gas resources,
although a 2017 study by geologists at University of
Johannesburg said this was probably 13 tcf, the lower end of
estimates ranging between 13 tcf to 390 tcf.
    Even 5 tcf would be enough for a 1,000 megawatt (MW) to
2,000 MW gas-fired power plant to supply electricity for up to
30 years, the Academy of Sciences of South Africa said in its
Karoo shale gas action plan released last year. 
    It isn't clear how the cost would compare to existing coal
fire power stations or the ever-cheaper wind and solar energies
that are gradually replacing them.
    Fracking in the Karoo Basin, a vast area covering more than
half of South Africa's land surface, has been shelved for a
decade because of resistance from environmental activists and
farmers, and regulatory uncertainty.
    Shell's 90,000 square kms is available after the oil major
early last year withdrew an application to explore, Sayidini
said.
    Confirming the withdrawal, a Shell spokesperson said they
are focussing upstream investment on fewer basins that align
with global strategy and where Shell has competitive advantages.
    New shale blocks offered will be smaller to increase
participation, Sayidini said. It could take a decade or longer
for the first gas output, if sufficient resources are found.
        
  
    RISK TO ENVIRONMENT 
        Falcon Oil & Gas  FO.V  and Bundu Gas and Oil
Exploration, a majority-owned unit of Australia's Challenger
Exploration  CEL.AX , retained rights to apply for exploration
licenses, Sayidini said.
    "We believe this is the place to be with the best potential
to make it commercially viable," Philip O'Quigley, Falcon's CEO
told Reuters of the southern part of the basin, where the
company is seeking a license.
    Some 2,500 soil samples from the Karoo were sent overseas
for analysis, PASA officials said.
    "Those confirmed gas and even oil seepages, so we now
believe there might even be potential for oil in the Karoo,"
Sayidini said.
    Activists and farmers worried about air quality, soil
degradation and water use in a parched, semi-arid region remain
sceptical.
    "The enormous risk it poses to the environment cannot be
understated," said Jonathan Deal, founder of Treasure the Karoo
Action Group, a non-profit organization specifically established
to oppose fracking in the area.
    Hydraulic fracturing or fracking, a process where chemicals
and water are injected into rock fissures to free gas, requires
vast quantities of water.
        Oil companies have suggested trucking or piping it in,
although this might prove prohibitively expensive. Others
propose water used for drilling and fracking being recovered and
re-used, although it is unclear how viable that is. 
    New fracking regulations released for public comment last
year are to be finalised in August, the department of
environmental affairs said.  urn:newsml:reuters.com:*:nL8N2YV2DI
        But farmers -- fearing competition over scarce water
that may become depleted or polluted -- think the fracking risk
is too great.
    Brent McNamara, chief executive of Agri-Eastern Cape, said
he feared it would damage agricultural productivity.

 (Reporting by Wendell Roelf
Editing by Tim Cocks and Simon Cameron-Moore)
 ((wendell.roelf@thomsonreuters.com; +27 21 461 3523;))