Shell’s shale decision hurts S’Africa

SHELL’s announcement that it would be scaling back its shale gas exploration has been described as a blow to the South African government, which has punted shale gas as a “game changer” for the economy.

The African National Congress’s 2014 election manifesto said the party would intensify the pace of oil and gas exploration — including shale gas — as part of attempts to ensure “national self-sufficiency and energy security”.

The country’s energy situation remains dire and diversifying energy sources is a key priority for the government.

Shale gas forms part of the government’s energy security plans, with President Jacob Zuma describing it as a “game changer” for the economy in his state of the nation address last year.

But the slow pace of creating a legislative and regulatory framework for shale gas exploration has reportedly contributed to Shell’s decision to “scale down”.

Shell SA chairman Bonang Mohale on Monday confirmed reports that in light of the low oil price, the company had “critically reviewed the competitiveness” of its projects and opportunities worldwide.

“As part of this review, we have adjusted activities in tight/shale oil and gas opportunities outside of the Americas as well as the local exploration resources, such as staffing, in SA,” he said.

A Business Times report on Sunday quoted a Parliamentary source saying Shell had “given up on the government getting it together any time soon” to make adjustments to the Mineral and Petroleum Resources Development Bill or release regulations for hydraulic fracturing, or fracking.

Mohala said Shell SA needed “clarity” on the bill — which Mr Zuma sent back to Parliament in January for reconsideration after he found that it did not pass constitutional muster.

The bill was passed by Parliament in March last year.
“Should attractive commercial terms be put in place, the Karoo project could compete favourably within Shell’s global tight/shale gas and oil portfolio,” he said.

“We will continue our ongoing consultation with the government, industry and the people of SA about the long-term opportunities of shale gas.”
The Treasure Karoo Action Group welcomed Shell SA’s announcement. CEO Jonathan Deal said that while the current situation had arisen through the “government’s mishandling of this issue and the drop in global oil prices”, he felt fracking would eventually be exposed as a “bridge to nowhere”.