Energy group Shell confirmed on Wednesday that the company had received notification from the Petroleum Agency South Africa (Pasa) that its applications for three exploration rights in the Karoo, which had been submitted in 2009, were being processed.

But Shell South Africa Marketing chairperson Bonang Mohale said it was also seeking clarity from both Pasa and the Department of Mineral Resources (DMR) on the precise meaning of the notifications.

Pasa confirmed in late October that it would proceed with the processing of shale-gas applications received prior to February 1, 2011, from Shell South Africa Upstream, Falcon Oil and Gas and Bundu Oil and Gas Exploration.

But it said the moratorium on new applications remained in place and that the processing of pending applications was subject to a condition preventing actual hydraulic fracturing (fracking) “until the appropriate amendments to the regulations have been promulgated”.

The agency also requested the applicants to review and, where necessary, augment Environmental Management Programmes (EMPs), which could necessitate further public consultations.

Shell, which submitted applications for three blocs in a 90 000 km² area, had already hosted two public consultation processes, leading to the generation of around 6 300 questions from the public. It had also submitted three EMPs, collectively involving documents running to over 80 000 pages.

Mohale said that, while the issuance of exploration rights was now probably “months not years away”, Shell had concerns about the nature of the commercial terms governing exploration and whether these were designed to encourage investment.

The true measure of “substantial progress” would be receipt of an exploration-rights agreement that had “good commercial terms” – terms that would emanate out of fracking-specific regulations that had been fully canvassed.

Pasa acknowledged that it had moved ahead in the absence of final fracking regulations, but stressed that the decision had been taken following extensive discussions with the DMR.

Mohale said the group was applying its mind to the notification letters and would be in engaging with Pasa and the DMR to gain clarity. Likewise, it was continuing to raise its concerns with the DMR with regard to proposed amendments to the Mineral and Petroleum Resources Development Act, which the oil and gas industry had warned would not be supportive of new investment in the sector.

He expressed frustration at the fact that six years had lapsed since Shell first expressed interest exploring for shale gas in the Karoo. However, he indicated that the multinational remained committed to its plan of drilling six exploration wells to ascertain whether or not there was in fact gas that could be commercially extracted.

$150M to $200M

Shell South Africa Upstream GM Jan Willem Eggink said there was a “good chance” that the programme, which would involve an investment of between $150-million and $200-million, would yield results. However, he also stressed that as a “frontier exploration” programme there was also the risk that no gas would be discovered.

Current estimates suggest that the Karoo basin could hold between 380-trillion cubic feet (tcf) and 485 tcf, but Shell and the other explorers argued that the actual size could only be truly determined through exploration.

Eggink said water and land remained the two major areas of anxiety for interested parties in the Karoo and gave assurances that Shell had strategies in place to deal with both concerns.

Its wells would be “sealed” to mitigate the risk of groundwater contamination, while any water used during exploration or development would either be imported into the area, or sourced in a way that did not compete with the farming activities.

Exploration well pads, meanwhile, would require an area of around 150 m² for a single pad, together with an access road.

Should Shell proceed to development, it would probably drill up to 2 000 wells in an area. “Nowadays we can drill something like 30 wells from one of these well pads. So for 2 000 wells, if you have 30 wells a well-pad, would require 60 to 70 well pads, spaced around 4 km apart.”

Eggink said that represented an area of about 30 km², which was “roughly 1%” of the area for which it was applying.

“There are people that are highly concerned that the entire Karoo will be riddled with drilling rigs. There will be industrial activity, there will be trucks driving around, but it will be in a very focused area,” he concluded.