/ 10 October 2013

Shabangu presents new regulations for fracking

Shabangu Presents New Regulations For Fracking

Lines are being drawn in the sand as civil society organisations ready themselves for "a protracted battle on all fronts" over the start of hydraulic fracturing, or fracking, in the Karoo.

On Thursday, just as Mineral Resources Minister Susan Shabangu announced proposed technical regulations, that will govern shale gas drilling, anti-fracking alliance Treasure the Karoo Action Group (TKAG), and AfriForum warned that misinformation over the potential of shale gas to the economy was forming the basis of energy policy.

Chief executive of TKAG Jonathan Deal criticised what he believed to be the hype around the success of shale gas in places such as the United States, where shale was not delivering on the promises made by industry players.

He pointed to the losses for major oil companies who had heavily invested in the shale boom, but were now recording massive write-downs. Not least of these is Shell, which recently reported a $2-billion write-down on its US shale business.

Shell's outgoing chief executive Peter Voser told the Financial Times last week that his biggest regret during his tenure was the huge bet the company made on US shale gas.

The industry had overestimated the production forecasts dramatically, while drilling activity was in decline, said Deal. Falling gas prices had also contributed it problems rendering many gas wells uneconomical, he said.

"Global decisions are being made and energy policy is being formed on a foundation of hype, speculation and desperation," said Deal.

The alliance also released a "peer-reviewed critique" of an often-cited study by consultancy Econometrix, done on behalf of Shell, examining the potential economic impacts of fracking.

Deal said the opinion of international and far-thinking economists differed markedly from the methods employed in the Econometrix study.

AfriForum was extremely concerned about the negative impacts shale gas exploitation could have on the country and was prepared to go to court to fight it, according to their head of environmental affairs Julius Kleynhans. 

"We will stand firm against shale gas mining in South Africa, and we will take legal action if we need to, to [get] government to take the right decisions," Kleynhans said.

The alliance would be making inputs on the regulations, and it would soon begin consulting with senior advocates  to discuss "the fracking saga", said Kleynhans.

But the advent of fracking could be potentially lucrative for the state and boost economic growth, according to government. In a post-Cabinet briefing in Pretoria, Shabangu said that under proposed amendments to the Mineral and Petroleum Resources Development Act, currently before Parliament, the state would seek the first 20% in any new oil or gas venture as a free carried interest.

This figure was from a Cabinet policy agreement taken in November, she said. Should the state seek to increase its share, it could take its interest to up to a maximum of 50% but would have to pay market-related prices for an additional 30%.

Technical regulations
The proposed technical regulations on petroleum exploration and exploitation were being incorporated into the amendments of Mineral and Petroleum Resources Development Act, said Shabangu. The regulations are intended to cover both onshore and offshore exploitation and production operations.

Government did not have its own figures on what the economic impacts of shale gas could be for South Africa, said Shabangu. But she believed that development seen in the US meant that it could be a game changer to South Africa's energy market. It could also potentially promote the development of infrastructure and boost skills development.

According to the technical regulations, it would provide for assessment of the potential environmental impacts of fracking activities such as the protection of fresh water resources; the protection of biodiversity; and mechanisms for site-specific buffer-zone determination between shale gas exploration and the Square Kilometre Array (SKA) radio astronomy project.

In the design of the regulations the government believed it had acted "in the best possible way, in the interests of the South African economy and its citizens [and would] continue to do so as [it] traverses this journey of hydraulic fracturing for the production of shale gas", she said.