The South African government would have a free-carried shareholding of 20% in entities producing shale gas in the Karoo in the future, Mineral Resources Minister Susan Shabangu said last week.

Shabangu, who was responding to Mining Weekly at question time during a post- Cabinet media briefing, said that the free-carried 20% was already catered for in the amendments to the Mineral and Petroleum Resources Development Act (MPRDA) currently before Parliament.

She added that the State would be permitted to own up to 50% of gas-producing companies, but only the first 20% would be free-carried.

If government decided to take up the remaining 30%, it would be required to pay full market value for the additional interest.

Shabangu was speaking to journalists after announcing that Cabinet had given the go-ahead for a new set of globally benchmarked technical regulations to be gazetted for the exploration for and exploitation of shale gas in South Africa’s Karoo region, and that the South African public would be given 30 days to comment on the regulations, which had been based on global best practice in a number of international jurisdictions.

Once government had decided in November on the go-ahead for the pursuit of shale gas through hydraulic fracturing, the next step was to determine how this would be done.

In determining the ‘how’, the government had come to the conclusion that free carries were common in the oil and gas sector and should be taken up.

“We cannot ignore what happens globally and that’s also what informed us. Indeed, States do become free carriers in this particular space, which also creates an opportunity for partnership.

“We’ve created scope for this in the MPRDA amendments and hence that’s what we are pursuing now for the petroleum sector as a whole with the amendments now before Parliament.

“That’s also directly linked to the technical regulations that have just been passed by government,” Shabangu added.

Government was setting out to create clear guidelines from the start in what was a greenfield area of business that was starting from scratch.

The regulations to be gazetted would apply to both onshore and offshore activities and ensure that all petroleum exploration and exploitation met the highest global standards.

A comprehensive international benchmarking exercise had been carried out by six government departments, including Water, Environmental Affairs and Science and Technology, to ensure that hydraulic fracturing – or fracking as it is often called – did not negatively impact on fresh water resources, biodiversity and palaeontology and provided buffer zones to shield specific sites like the Square Kilometre Array project.
Fracture fluids and structures to be used in the hydraulic fracturing process would have to be fully disclosed and depleted well areas fully rehabilitated.

Cabinet’s decision to open the way for shale gas production was based on government’s responsibility to ensure energy security, and shale gas provided the country with a potential opportunity to reindustrialise the South African economy.

However, AfriForum has vowed to stop the production of shale gas in the Karoo.

“We are ready for a protracted battle on all fronts,” AfriForum environmental head Julius Kleynhans said in a media release.

Treasure the Karoo Action Group CEO Jonathan Deal also came out against the gazetting.

Deal asserted that at the very minimum, “the government must stop and consider, and openly involve various stakeholders in a comprehensive and far-reaching study of every aspect of this decision”.
However, Shabangu said that government was satisfied that it had acted in the best possible way, in the interests of the South African economy and its citizens.

“And we will continue to do so as we traverse this journey of hydraulic fracturing for the production of shale gas,” she added.