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Shale gas: Govt to take 20% – Upset companies with exploration rights

Shale gas: Govt to take 20% – Upset companies with exploration rights

Deur Johan Eybers Sondag 02 November 2014 1:10 vm.

RAPPORT, Sunday, Nov. 2, 2014

By Johan Eybers Sunday, November 2nd, 2014 1:10 am.
Exploration in the Karoo for shale gas faces another obstacle because big oil companies are unhappy with the suggestions that the 20% of their production rights would automatically go to the government.

While the government last week finally lifted the moratorium on the processing and issuance of new permits for shale gas exploration in the Karoo, this threatens even companies that have permission to go into the gas to abandon their plans.

Report has reliably learned that oil companies are currently negotiating behind the scenes to persuade the government to abandon its bill under which the state has a 20% interest in all prospecting and production and has options later to buy out companies’ rights.

“The mandatory 10% empowerment interests, but also the amendments to the Law on the Development of Mineral and Petroleum Resources (MPRDA) moved up to 26%, is for them a headache,” said a reliable source.

“It is clear that prospective prospectors are not prepared to spend billions on the exploration of fracking, only to see it taken over by the state,” said Rob Jeffreys, an economist. Jeffreys welcomed the lifting the moratorium on the issuance of new exploration permits, but said the government’s intention to introduce a 20% stake in all projects would scare off investors. According to him, it will be disastrous if the government does solve the uncertainty over ownership and investors may no longer be interested in shale gas to be explored. “Even though shale gas reserves in the Karoo are less than 10% of earlier estimates, the development is still equivalent to about 40 projects of Mossgas size. Jacob Zuma is right when he says the discovery of shale gas in the Karoo will be a game changer.”
“It will be a vital role for a solution to South Africa’s lack of energy resources and a lack of power. Every year the country will save billions in foreign currencies, which otherwise would have spent to import these products, “he says.
“Companies that are willing to do exploration are taking a big chance. There is no certainty whether shale gas is in the Karoo, and it is clear that the production cost will be high.”
The oil giants Shell and Chevron and Challenger Energy, an Australian energy company are all part of consortiums that have obtained licenses for exploration to do.
Wlady Altermann, professor of Geodynamics at the University of Pretoria, said even though many shale gas in the Karoo discover it much more expensive to exploit than in places like the US and Canada.
“Companies that are willing to do exploration, taking a big chance. There is no certainty whether shale gas in the Karoo, and it is clear that the production cost will be high. ”
Altermann explain the Karoo is underground like a rock with thousands of bags. This means there must be thousands of times in the “rock” drilled to release the gas.
“It can make fracking in the Karoo very expensive,” says Altermann.
Saliem Fakir of the World Wildlife Fund (WWF) in South Africa says their research shows that shale gas exploitation in the Karoo is not economically viable.
Dineo Pooe, spokesman for Shell, said the oil company is currently in its closed period during which directors may trade their shares and that she is therefore not able to comment it.
Chevron and Challenger Energy could not be reached by RAPPORT for comment.