On September 11, 2012, following the recommendations of the Working Group on Shale Gas and Hydraulic Fracturing, the South African Government lifted an 18-month long moratorium on applications for shale gas exploration in the Karoo Basin, under which most of South Africa’s natural gas lies. In its report, the Working Group stressed that the effect of an extended moratorium would be to reduce economic opportunity, impede the understanding of the real extent of the potential resource, hamper the development of coalbed methane and other hydrocarbon resources in low-permeability reservoirs, and remove the potential economic benefit to severely deprived communities in the Karoo.
The lifting of the moratorium will allow more companies, in addition to the five that applied for exploration rights prior to the moratorium, to apply for shale gas exploration rights and to test the extent of recoverable gas reserves in the Karoo Basin. The Government has stressed that licensing will proceed in line with the administrative guidelines of South Africa’s Mineral and Petroleum Development Act.
Notwithstanding the lifting of the moratorium, the Working Group noted that South Africa’s current regulatory framework may not be entirely appropriate to meet the demands of fracking and companies will only be allowed to conduct certain exploration activities, including geological mapping and other data gathering activities, until the regulatory framework has been sufficiently augmented to ensure robust regulation and compliance monitoring. In particular, the Working Group noted that regulations relating to water usage and disposal would need to be studied and analysed in depth against the potential of allowing full scale fracking. The process of augmenting the regulatory framework is expected to take between six to twelve months. During this time, actual fracking activities, which are essential during the later stages of exploration, would remain prohibited. The South African Government has further indicated that it would have to assess every step toward full scale hydraulic fracturing for possible “unacceptable outcomes”, in which event the process may be halted.
The existence and development of a significant gas resource in the Karoo Basin could have significant implications for South Africa’s carbon footprint and energy security by reducing national dependence on other fossil fuels. The US Energy Information Administration has estimated the current technically recoverable reserves in South Africa at 485 TCF, one of the world’s largest, and has also identified South Africa as one of the countries in the world where shale gas development may appear most attractive, given the present lack of current gas consumption.
The full report of the Working Group on Shale Gas and Hydraulic Fracturing is available on the Republic of South Africa Department of Mineral Resources website.