SHALE ROCK DRILLING, TEXAS
Hydraulic fracturing, which is now prominent in South Africa, is expected to start within 12 to 18 months
Photo by: Bloomberg
The possibility of successful gas projects will depend on the emergence of willing investors to fund the costs of exploratory drilling, says business law firm Cliffe Dekker Hofmeyr and an increase in appetite from private investors could encourage an increase in private participation in the South African gas market, speculate senior associate for projects and infrastructure Bianca Pollastrini and candidate attorney for projects and infrastructure Adriaan van der Merwe.
“After the publication of the Technical Regulations for Petroleum Exploration and Exploitation, which is expected this month, exploration licences will be issued by the Department of Mineral Resources, with hydraulic fracturing (fracking) expected to start within 12 to 18 months thereafter,” says Pollastrini.
She tells Engineering News that government is currently drafting its Gas Utilisation Master Plan (Gump), which will explain how South Africa envisages using natural gas until 2050.
Pollastrini says Gump will assess constraints in the gas industry and will include planning for future infrastructure development to realise gas-to-power generation. Gump will consider different types of gas supplies, such as imported piped gas, as well as locally extracted natural and shale gas.
State of the Industry
Gas has long been a neglected part of the South African energy mix, contributing only 2.8% to the primary energy supply, says Van der Merwe.
He adds, however, that there could be a drastic change in the situation if the US Energy Information Administration is correct in estimating that South Africa’s shale gas deposits are about 390-trillion cubic feet. “However, at this stage, the full extent of South Africa’s gas reserves is unknown.”
Van der Merwe says, while the possible extraction of gas using fracking has sparked contentious debate, specifically with regard to the potential ecological risk it poses for the Karoo basin. These risks must always be weighed up against the minimised carbon dioxide emissions when using gas to supply energy.
Another consideration is that gas is not subject to intermittent supply, as is the case with the various renewable-energy options.
Van der Merwe further notes that South Africa currently has limited domestic gas reserves, as well as a limited gas infrastructure which is mainly situated in Gauteng. He adds that, to use continuous gas supply, new infrastructure will be needed. “In addition to the pipelines needed to transport the gas to ensure widespread distribution, supporting energy infrastructure must also be upgraded.”
The revised Integrated Resource Plan states that 3 125 MW of electricity needs to be procured from gas by 2025. Van der Merwe says Gump is expected to be instrumental in outlining how this will be achieved.
He adds that, to realise a thriving gas industry, certainty needs to be created in the market, which will be realised through an enabling regulatory and fiscal environment.
Van der Merwe says, according to the National Energy Regulator of South Africa (Nersa), challenges in the gas sector can be dealt with through strategic partnerships between government and private entities.
Pollastrini reiterates Nersa’s opinion that policy signals and government support are required to enhance market interest in natural gas as a viable option and to encourage investment.
She says legislative developments in the gas industry support the Department of Energy’s Integrated Resource Plan, which envisages that 14% of all new energy generation capacity will be procured from gas.
“Bearing in mind the availability of natural gas in Namibia and Mozambique, the discovery of offshore gas along the South African coast, exploration in the Orange River basin and possible onshore coal-bed methane extraction in the north of South Africa, a new and exciting era in the country’s gas sector can be expected,” Van der Merwe concludes.