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Shale gas could be a blessing or a curse – report

Shale gas could be a blessing or a curse – report

Photo by Bloomberg

27th June 2014

By: Natasha Odendaal

Creamer Media Senior Deputy Editor

  

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Shale gas development could either facilitate or hinder South Africa’s transition from reliance on coal-fired energy towards clean energy with universal access to electricity.

While the development of shale gas in the country was deemed a route to a cleaner future, a shale boom could potentially sideline investments in renewable-energy generation and hike long-term carbon dioxide (CO2) emissions, US-based Frederick S Pardee Center for International Futures assistant researcher Steve Hedden said this week.

Speaking at the Gas Week conference, held in Bryanston, he outlined the results of an ‘African Futures’ policy brief, showing three potential scenarios for South Africa’s energy future.

Natural gas had been deemed a cleaner alternative to the country’s primary energy source and there were expectations that it could lead to a short-term decrease in CO2 emissions; however, the scales could tip towards a “blessing or a curse” depending on the approach taken, the brief revealed.

Despite government’s current plans for exploration, many environmental groups still hold onto the hope that hydraulic fracturing (fracking), which is used to access the shale gas resource, would not be allowed.

Hedden said the report explored a “base case scenario” in which a fracking-free status quo continued, offering the promise of preserving the water and natural resources of the Karoo, but contributing little to South Africa’s economy.

The base case saw increased renewable energy, with growth in coal production starting to slow by 2020. Coal production would then peak in the early 2030s before starting to decline.

The base case also forecast a peak, then a plateau, in South Africa’s carbon emissions, with a significant decline not likely until the early 2030s.

The base case assumed an energy mix of 51% renewable energy, 46% coal and 3% nuclear, with no shale gas contribution, by 2050.

The brief’s “shale boom” scenario, on the contrary, would see South Africa increasing its natural gas production to 644-million barrels of oil-equivalent by 2050, accounting for 26% of energy output.

Coal production would contract to account for 34%, renewable energy 38% and nuclear 2%.

The increased natural gas production, therefore, would not necessarily translate into a reduction of coal production or CO2 emissions.

“While the move to shale would initially have a slight downward impact on emissions, the long-term impacts would be negative for climate change,” the report pointed out.

As surplus natural gas would drive down energy pricing, energy consumption would likely rise and investments into renewable-energy production would be reduced.

“Our ... shale boom scenario allows for shale gas development and could significantly boost economic growth, reduce poverty and provide more resources for spending on education, health and infrastructure,” Hedden noted.

The boom would lead to an increase in overall gross domestic product and an increase in per capita production of more than R12 156 by 2050.

About 400 000 fewer people would be living in extreme poverty and government could spend R912-billion more on healthcare, education and infrastructure, while generating more revenue for government.

However, these gains were expected to come with certain steep trade-offs.

The increase in natural gas exports would see the export of other goods and services from South Africa becoming more expensive.

“While energy exports [will] increase, the exports of services, manufactured goods and agriculture, besides others, [will] all decline.”

Further, the potential environmental impacts were widespread, with significant water contamination, destruction of natural habitats, increases in earthquakes and no long-term reduction in carbon emissions.

In a third scenario, the “blue bridge”, South Africa could capitalise on the economic gains from a shale gas boom by investing in renewable energy, which would drive long-term sustainability.

This scenario introduced a small tax on the production of natural gas from fracking that was to be invested in renewable-energy infrastructure and production.

It offered “the most promise” for South Africa’s transition to a renewable-energy-based economy, lowering shale production relative to the shale boom scenario, reducing carbon emissions, producing more overall energy and damaging fewer natural resources in the long term.

The blue bridge case outlined an energy mix of 16% from gas, 27% from coal, 2% from nuclear and 55% from renewable energy.

Gas production would grow at the start of this scenario but, because the transition tax would increase over time, gas production plateaus were expected in the 2040s as the cost effectiveness of fracking declines.

The blue bridge scenario offered less severe environmental impacts, but with similar economic and social benefits to that of the shale gas boom scenario.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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