OBG talks to Bonang Mohale, Chairman, Shell South Africa

Interview: Bonang Mohale

How critical is the need to expand the extent of domestic gas production?

BONANG MOHALE: Some 10m South Africans have no access to electricity, representing about 20% of the country’s population. The country has in recent years experienced power blackouts with dire consequences for the economy. South Africa is in a position where, because of the huge gap in the energy supply, it will need to invest in all types of energy sources, ranging from coal, to gas, to nuclear and to renewables.

In our view, the case for natural gas is compelling. A modern natural gas plant emits half the carbon dioxide of a modern coal plant, and up to 70% less than a decades-old steam turbine coal plant. The Energy Information Administration (EIA) has previously estimated the potential shale gas resources in South Africa to be around 485trn cu feet (tcf), which is an incredible amount considering that in many parts of the world, gas pipelines have been laid for reserves of just 2 tcf.

So in addition to contributing to closing the power generation gap, natural gas is affordable and environmentally acceptable. The country could also realise substantial job creation and other benefits should economically viable gas resources exist in the Karoo.

What do you see as the biggest risks associated with fracking in the Karoo? What steps have been taken to address concerns from the community?

MOHALE: Fracking has been taking place in parts of the world for over 60 years, and the technology is constantly improving so as to mitigate the associated risks. There are perhaps three main risk areas associated with fracking in the Karoo: the limited availability of water, the risk of contaminating freshwater aquifers and the potential environmental impact.

We recognise that in an arid area like the Karoo, even limited water use may be a concern. We have made legally binding commitments not to compete with residents of the Karoo for their fresh water. For the initial exploration wells we intend to import the water by truck or rail, until the team of groundwater specialists can confirm alternative sources of deeper, brackish, non-potable waters that could be used. Regarding the risk of contamination, a recent study by the US Energy Department has looked into the issue of the potential health and environmental impacts of hydraulic fracturing, confirming that when a well is designed and constructed correctly, applying the best drilling standards and practices, groundwater will not be contaminated.

With respect to general environmental concerns, development activity would be limited to a surface area that is less than 1% of the area for which Shell has applied. Once the gas wells are drilled and fractured, relatively little on-site activity is necessary to keep them producing for 15 years or more.

In what ways could fracking benefit the region of Karoo if it were to go ahead as planned?

MOHALE: A study conducted on Shell’s behalf by economic consulting firm Econometrix focuses on two conservative scenarios: the successful extraction of 20 tcf and 50 tcf, or 4% and 10% respectively of the estimated shale gas reserves in the Karoo. This would translate into a GDP contribution of around 3.3% to 9.6%, with an estimated 300,000-700,000 permanent jobs for a period of 25 years, which is the expected lifetime of an initial first phase shale gas development. As with everything else in business, there are risks. To mitigate these risks, we will continue to maintain the very highest operational standards, as underpinned by our global onshore shale gas operating principles.

Furthermore, South Africa’s legislation is fairly stringent, and for each part of the process, specific environmental impact assessments must be undertaken. The process also includes multiple rounds of consultation with the local community, which gives the people of the Karoo an opportunity to provide input. The entire process is transparent and open, and is not being rushed to ensure that decisions are informed by a well thought through process involving all stakeholders.