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OPINION PIECE ‘GAME CHANGING’ SHALE GAS THROUGH THE LOOKING GLASS On invitation by ESI Africa, Jeanie le Roux, Director of Operations at Treasure Karoo Action Group, shares her thoughts and knowledge about shale gas in South Africa and on the global stage. I n 2011, TIME magazine called fracking the biggest environmental issue of the year while the International Energy Agency (IEA) declared a ‘golden age of gas’. While President Obama announced a ‘hundred years of gas’ for America, some governments chose to place a ban or moratorium on the use of the technology due to environmental and health concerns. Shale gas has been met with fierce public opposition in several countries including the UK, USA, Canada, Bulgaria, France, Romania and several other places where the debate around shale gas is active. Countries like France, Bulgaria, the Netherlands and Germany have placed bans/moratoria or restrictions on the practice along with several cities, counties and states across the globe. The ‘game changer’ rhetoric was introduced through a 2012 study by the economic consultancy, Econometrix, which was commissioned and paid for by Shell – the most vocal applicant for shale gas in South Africa. Soon senior government officials were using similar vocabulary when referring to fracking in South Africa, followed by President Zuma finally referring to shale gas as a ‘game changer’ in his State of the Nation Address. ‘…while shale gas is recognised as a game changer for our economy. We will pursue the shale gas option within the framework of our good environmental laws.’ President Jacob Zuma, State of the Nation Address, June 2014 Energy security and diversification are terms that have become part of energy policies and development plans across the globe in recent 50 years and have been used to market shale gas to countries outside the USA. For the South African energy sector the possibility of having large domestic gas supplies is a very attractive option, but the extent of shale gas deposits in South Africa, whether it is economically viable and whether it can be extracted safely, remains elusive. In 2011, South Africa was listed as having the fifth largest shale gas deposit in the world by the US Energy Information Administration (EIA). To determine the true extent of the resource, exploratory drilling would need to take place. This estimate by the EIA, however, was based on desktop studies and was more recently dramatically reduced from 485 tcf to 390 tcf, after taking into account the unique geology of the Karoo and the fact that a significant portion of the gas may have been burned off during a volcanic period millions of years ago. The EIA is the same agency that estimated the reserve size of major shale plays in the USA, including the Marcellus shale, which was reduced by as much as 80% in late 2011. Many predictions for countries outside the USA, first believed to have ‘game changing’ shale gas on their doorsteps, were proven wrong when either the reserves were not there or the local contexts such as the geology, lack of infrastructure and resulting drilling costs were not conducive to the economic feasibility of the projects. This has happened in, among other places, China, Ukraine and Poland. It could very well happen in South Africa as well. In many parts of the USA, extensive gas infrastructure is available since land owners often own the mineral rights beneath their soil. Thus financial incentives could be provided to landowners to lease their land to drilling companies. In South Africa the mineral rights belong to the state and will therefore not place landowners in a position where they can easily gain financially from fracking. It is not uncommon for shale reserves to be overestimated in the initial phases of the assessment. Since oil companies extract finite resources, they need to persuade investors that they have access to future reserves in order to deliver good results to shareholders. It has been suggested that this is the reason (especially in high risk, unconventional reserves such as shale gas) oil and gas reserves are overestimated significantly before exploration and only later adjusted. PASA (Petroleum Agency of South Africa) estimated 40 tcf of shale gas for their best case scenario for South Africa. At this stage, the existence of shale gas in South Africa remains to be proven and any estimates ESI AFRICA ISSUE 4 2014