The draft Mineral and Petroleum Resources Development Act (MPRDA) Amendment Bill, which was published for public comment in December, indicates some far-reaching changes in the future, including the possibility of creating a regulatory environment to enable and facilitate exploration for and production of shale gas, says international law firm Norton Rose energy director for sub-Saharan Africa Matt Ash.

While there are significant challenges in this regard, particularly in terms of the environment, Ash believes that the draft Amendment Bill will ensure that proper mitigation measures are put in place.

“There is a noticeable tightening in the application of the National Environmental Management Act (Nema) of 2009, which has always created confusion in terms of its application to the MPRDA. However, it is now clear that Nema processes will apply fully to the MPRDA,” he explains.

Nema requires those seeking prospecting and mining rights in the mining sector, or exploration and production rights in the hydrocarbon sector from the departments of Water and Environmental Affairs, to first conduct an extensive environmental-impact assessment and develop an environmental management plan to mitigate any potential harm to the environment.

“Based on this comprehensive process, which includes consultation, public participation and an in-depth analysis and report process, the Department of Environmental Affairs will consider the application and either issue or decline an environmental authorisation,” says Ash.

He adds that the ties to Nema in the MPRDA clarify certain ambiguities with regard to environmental policy, allowing for a process which ensures that all the relevant frameworks have been put in place.

These frameworks, says Ash, are particularly important from an oil and gas perspective, considering the widespread concern about their impact on the environment, especially in terms of shale gas.

IRP and IEP

The Integrated Resources Plan (IRP), which was updated in 2011 and outlines South Africa’s new electricity generation plan from 2010 to 2030, is the policy that leads the way forward for South Africa’s energy sector.

The IRP guides the procurement of new generating capacity across all sectors and propounds the addition of 17.8 GW of renewable- energy generating capacity and 9.6 GW of nuclear energy generating capacity by 2030.

“In the IRP, government outlines what it intends to do as far as power generating procurement is concerned,” says Ash.

He also highlights the Department of Energy’s (DoE’s) Integrated Energy Plan (IEP), which, according to Energy Minister Dipuo Peters, “provides a roadmap of the future energy landscape for South Africa and guides future energy infrastructure investments and policy development”.

Using her powers under the Electricity Regulation Act of 2006, and referencing the IRP, Peters has just issued a further determination for baseload generation capacity. That determination includes nearly 2 700 MW to be procured from liquefied natural gas.

“Interestingly, the determination speaks of natural gas delivered by pipeline from a natural gas field. Moreover, the National Development Plan stipulates the further exploration and, if feasible, the exploitation of South Africa’s shale gas resource as one of its key projects,” says Ash.

“This shows that South Africa’s shale gas resource cannot be ignored – it is a potential game changer for the country,” he adds.

Ash mentions that, worldwide, there is a focus on the revenue-generating potential of shale gas but he believes that, for South Africa, it is more important for the country to become energy independent.

Ash believes that shale gas could be the answer to mitigating an impending power deficit in the medium to long term, though it is not an immediate solution.

While Cabinet’s moratorium on current applications for shale gas exploration rights has been lifted, those activities are, for now, likely to be confined to seismic investigation only.

It is likely that exploratory fracking will not be allowed until South Africa’s mining regulations have been augmented to take into account the unique environmental issues posed by the fracking process.

Meanwhile, present policy stipulates that new baseload generating capacity also includes nuclear power. In December, the DoE issued a request for proposal (RFP) for the appointment of a consultant to investigate and advise the DoE and the National Treasury on the feasibility of an owner- operator structure for the 9.6 GW nuclear programme, as stipulated in the IRP.

“This shows that government is clearly considering the possibility that, if the nuclear programme goes ahead, nuclear power stations could be built, owned and operated by independent power producers and not by Eskom,” says Ash.

“Further, this RFP indicates that government continues to view the nuclear build programme as a viable option,” he adds.

While the local renewable-energy industry is looking ahead to the third tender round of the Renewable Energy Independent Power Producer Programme (REIPPP), Ash cautions industry stakeholders not to forget about developing the gas and nuclear sectors, as the REIPPP Phase 1 projects have not yet reached commercial operation.

“Once the solar parks and wind farms have been built, and we have gained experience from these projects we will be able to say, with clarity, what the future really holds for renewables in South Africa.”

While Ash hopes that the REIPPP proves fruitful, he observes that it cannot supply the baseload power required by South Africans.

“The difficulty is that the wind does not always blow and the sun does not always shine. Until we have an appropriate power storage solution, we will always need sources of power generation other than renewables,” he says.

Ash believes the development of the gas and nuclear sectors in South Africa will provide long-term solutions for the baseload challenge in South Africa and considers Germany as a prime example of what will happen if South Africa neglects to develop anything other than renewable energy.

“Germany has faced some stark realities since it took a political decision in 2011 to do away with its nuclear progamme. Simulta- neously, however, the renewable-energy feed in-tariffs have been slashed regularly, to such a degree that, during the course of last year, German renewable-energy companies went under with equal regularity,” he says.

Ash further highlights Germany’s plans to construct 23 new coal-fired power stations, which is not as widely reported.

He also highlights the mounting pressure on renewable-energy programmes in the US, where the industry is heavily subsidised.

“The public is getting tired of the huge amount of federal money required to keep the renewables programmes going, especially in the context of the US debt crisis,” he says.

Meanwhile, the US is rapidly developing its gas resources as a possible source of income rather than a source of power generation.

“The US wants to sell gas in foreign markets, which should indicate to other countries whether to go ahead with shale gas mining. There has to be concern about what the gas price will be once US stocks really start entering the international market,” warns Ash.

Norton Rose in Africa

Norton Rose announced its merger with US law firm Fulbright & Jaworski in November 2012 and, as of June 1, 2013, will be known as Norton Rose Fulbright.

This move will put the law firm in the spotlight as one of the leading oil and gas firms in the world, says Ash, who believes that this translates into how Norton Rose operates in Africa.

“Together with extensive development in our infrastructure and mining work, the expansion of the energy practice is furthering our in-country footprint across the continent,” he says.

Besides offices in South Africa, Norton Rose has offices in Dar es Salaam and Casablanca and is close to establishing physical presence in other African countries.

“There is such enormous potential in Africa, in countries like Mozambique, Tanzania, Uganda, Ghana and Senegal,” says Ash, also highlighting Nigeria, Morocco, Tunisia and Egypt as countries in which Norton Rose has recently been active.

He tells Engineering News that, as energy industries grow in certain countries, the firm is likely to follow suit.

Norton Rose will, once again, send a consortium of delegates to the Africa Energy Indaba 2013, which Ash hopes will broaden the discussion across all energy sectors throughout the African continent.