South Africa accused of ignoring shale gas fracking dangers

Cape Town (Platts)--21Oct2013/956 am EDT/1356 GMT


Anti-fracking campaigners have accused South Africa's government of rushing to pursue shale gas exploration without engaging with stakeholders and conducting transparent impact studies.

Friends of the Earth sent a letter to President Jacob Zuma on Saturday, when demonstrators took to the streets in Canada, the US, the UK, Spain, France, Ireland and South Africa, demanding an end to fracking.

FOE said it was concerned the government was moving too fast to authorize shale gas exploration in the semi-desert Karoo region, where Shell, Falcon Gas & Oil with its partner Chevron, and Bundu Gas & Oil have applied for permits. South Africa's government earlier this month gazetted draft regulations to govern the further exploration and exploitation of the country's shale gas resources of 485 trillion cubic feet, about the fifth-largest in the world.

Industry experts say it will add Rand 200 billion a year ($19 billion) to the economy even if just 10% of the resources are developed commercially, and create thousands of jobs.

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In April 2011, a shale gas exploration moratorium was imposed by the government after environmentalists and local opponents of fracking said the drilling process risks contaminating ground water in the Karoo.

In September last year, the government lifted the ban on exploration of shale gas but it was decided that no fracking could take place until draft regulations has been gazetted, a process that has now been completed.

The public will now have 30 days to comment on the regulations, a timeframe, some experts argue is far too short given the debate on environmental impact assessments.

The government stands to benefit when shale gas exploration permits are awarded given the proposed amendments to the Minerals and Petroleum Resources Development Bill, currently before parliament. The bill makes provision for the state to take 20% in new oil and gas ventures, up from 10% and a further 30% share by paying market-related rates.

Included in the proposed bill, is the provision that the oil and gas sector should also be subject to the Mining Charter rather than the Liquid Fuels Charter.

Though specific details about the provisions have yet to be clarified, the Mining Charter requires broad-based black economic empowerment (BBBEE) ownership and participation of 26% compared with the current 10% that applies to the upstream oil and gas industry.

Industry experts said the lack of clarity over the state interest in addition to the BBBEE requirements will deter investments in capital-intensive and risky ventures.

With its recurrent power shortages, South Africa is hoping to ween itself off coal-fired power plants which provide around 90% of electricity generation, and find alternative sources of energy.

"Not only does the potential of shale gas exploration and exploitation provide an opportunity for us to begin production of our own fuel, but it also marks the beginning of the reindustrialization of the South African economy,"

--Jacinta Moran, jacinta_morna@platts.com

--Edited by Jonathan Loades-Carter, jonathan.carter@platts.com

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