South Africa Targets Shale Gas to Reduce Oil Imports
South Africa’s petroleum regulator said Falcon Oil & Gas Ltd. and Bundu Gas and Oil Exploration Ltd. have applied for shale gas exploration permits as the nation looks to reduce its dependence on petroleum imports.
“We’re certainly going to have significant exploration in the next three years or so,” said Mthozami Xiphu, chief executive officer of Petroleum Agency SA, by phone from Cape Town yesterday. “In the next five, six years, we do expect the beginnings of significant production.”
Royal Dutch Shell Plc is studying data from an area of almost 200,000 square-kilometers (78,000 square-miles), while a group including Chesapeake Energy Corp., Statoil ASA and Sasol Ltd. has been granted a technical cooperation permit over about 88,000 square kilometers in the scarcely populated, arid Karoo region in the centre of South Africa.
Falcon, based in Denver, applied for exploration rights there after undertaking initial studies, Xiphu said. Anglo American Plc, which owns stakes in the world’s largest diamond and platinum producers, has applied for a technical cooperation permit over an area thought to contain shale gas, the company said in an e-mailed response to questions today.
The U.S. last year overtook Russia as the world’s largest producer of natural gas as shale-gas output rose to 10 percent of total supplies from 2 percent in 1990, in what BP Plc’s Chief Executive Officer Tony Hayward called a “quiet revolution.”
Dwindling Reserves
Exxon Mobil Corp., Mitsubishi Corp., Reliance Industries Ltd. and Sumitomo Corp. are expanding into shale gas as conventional energy reserves decline.
Technological advances have made the production of shale gas economically viable, a development that allowed the U.S. to reduce its dependence on imported liquefied natural gas, South Africa’s Petroleum Agency said in an e-mailed statement.
While drilling by former state-owned oil and gas company Soekor proved the presence of shale gas in the Karoo, the Petroleum Agency doesn’t know how much South Africa has, Xiphu said. Shale gas is natural gas produced from shale, a type of sedimentary rock.
Finding significant reserves would change South Africa’s energy profile, he said. “We are by far a net importer of energy resources in South Africa. We produce hardly 40 percent of the hydrocarbons we need.”
Opposition From Farmers
Shale gas could also be a solution for PetroSA, South Africa’s oil and gas company, which is looking for an energy source to replace the dwindling natural-gas reserves it taps from below the ocean floor on the west coast, Xiphu said. While PetroSA hasn’t applied for rights to explore for shale gas, companies that obtain production permits have to give PetroSA a 10 percent interest in their projects, Xiphu said.
Water access will be a challenge in the Karoo as the area has limited resources, while producers may also encounter opposition from the many farmers in the area, Xiphu said.
While the Chesapeake-Statoil-Sasol group has been granted a technical cooperation permit, it has yet to be issued, Xiphu said.
To contact the reporter on this story: Carli Lourens in Johannesburg at clourens@bloomberg.net
To contact the editor responsible for this story: Amanda Jordan at ajordan11@bloomberg.net
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