The exploitation of these key energy resources might also have a significant social, economic or environmental impact while also presenting considerable technical challenges.
Given the recent challenges the country is facing in terms of energy supply, the possibility of exploiting shale gas deposits for power generation is of current significance. Shale gas also presents other downstream opportunities. Some include providing a key resource for the production of liquid fuels and chemicals, or enabling the development of a domestic market for gas as a cleaner energy resource.
South Africa’s Karoo region, in the south west of the country, is thought to have significant reserves of shale gas. Recently there has been considerable interest from the government and various companies like Shell, Falcon and Bundu to develop a shale gas industry there. Considerable uncertainties exist regarding the extent of these reserves and the geology at depths where they are typically found. These and other uncertainties and constraints include the following.
Resolution of these uncertainties requires extensive and ongoing consultation with all relevant parties. As such government has an important role to play as an honest broker of key information.
These uncertainties point to specific risks and challenges associated with the establishment of a shale gas industry in South Africa. This will require government to create an enabling environment to encourage investment in the industry while also ensuring that the state and local communities benefit. It is also critical that there is clarity regarding the pricing structures that may prevail. This is crucial when the industry begins to exploit the shale gas reserves, and obviously requires a clearer understanding of the potential quantum of the known reserves.
Establishing a shale gas industry presents complex technical and economic challenges, and implementation will require a whole-of-government approach.
A structure at government level to facilitate and coordinate all the activities relating to the industry is recommended. This could coordinate the awarding of licences by various government departments and would have oversight of the activities of the regulators.
Awarding a production licence should proceed after satisfactory completion of terms associated with an exploration licence. This would require operators to demonstrate compliance of processes with legislation.
It is evident that before a shale gas industry in South Africa is implemented, important baseline studies need to be done. This will determine both the exact status quo prior to the commencement of a shale gas industry and the technical, social and economic consequences of such a development.
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