11 June 2012, 11:01

The more I read about the world's rapidly growing energy industry, and how much development is happening particularly on the shale gas front, the more I start to question why South Africa isn't jumping at the opportunity to develop the massive resource we have.

The estimates of the world's largest recoverable shale gas resources are as follows: (The Chemical Engineer, June 2012)

• China: 1,275 tn ft3

• Argentina: 774 tn ft3

• Mexico: 681 tn ft3

• South Africa: 485 tn ft3

• USA: 482 tn ft3

• Australia: 396 tn ft3

• Canada: 388 tn ft3

In the US, where shale gas has been produced commercially for about a decade now, they have seen a complete transformation of the energy industry. Natural gas prices are around 20% of what they were four years ago (TCE, June-12).

We are being crippled by high fuel prices. Approximately, 67% of the oil we consume, is from imports. We currently do not have enough refining capacity to produce enough petrol and diesel for our own needs and in addition to importing crude oil, we import refined products. Judging from many of the comments on News24 when the petrol price is raised, many people believe it is the Government's fault, full-stop. However, despite your indignation, it's not just Government trying to rip you off and increases duties, but it is largely driven by international oil markets. As we are a net importer, don't anticipate any respite from the price at the pump.

Shale gas can be used as a substitute to natural gas, for gas-fired power stations as well as in GTL (gas-to-liquid) processes to produce petrol and diesel.

On the first point, most of South Africa's power (about 90% - source US EIA) is generated by coal-fired power plants. Coal, is a dirty form of power generation with high CO2 emissions. The Green Peace argument that we should abandon all coal and nuclear power, and build loads of wind-turbines and solar panels is quite simply not feasible to satisfy our energy demands. (To give you an idea of scale: Medupi Power Plant will produce 4,800 MW of power. This equates to about 2,400 wind turbines needed to match the capacity. Think of the amount of land needed for 2,400 wind turbines). Instead, we need to have a diversified slate of energy feedstocks, moving away from coal, and investing in locally available resources such as shale gas as well as renewables.

On the second point, shale gas can be used directly as feedstock in GTL plants. Both Sasol (probably considered the world leader on this subject) and PetroSA have this technology. This gives us the ability to produce fuels reducing our reliance on imported natural gas and crude oil imports.

For the existing crude oil refineries, energy costs account for a massive proportion of refinery processing costs. Cheaper energy will encourage expansion in refining capacity, and offer more economic incentive to projects such as the COEGA refinery in the Eastern Cape, reducing our reliance on imported refined products. While shale gas is not a substitute for crude oil, the significantly lower processing costs involved in refining crude oil, can be passed on to the cost of fuels produced by refineries.

People's concerns about the risks associated with shale gas are obviously understandable. By now, everyone has either watched or read about the Gasland documentary, and the famous scene where the tap-water is set alight. Whether this is sensationalisation, or the honest-to God truth, is anyone's guess.

What we need is for an unbiased Environmental Impact Assessment to be carried out, neither funded by Shell, nor by the Karoo Land Owners Assocation. In any event, if the risks are manageable and controllable, we cannot allow raw emotion to prevent development.

At the risk of sounding insensitive here, should we be holding back potential benefits to all the citizens of the country, at the concern of affecting the livelihood of a few hundred people? Furthermore, I am not advocating destroying the livelihood of those people, instead ensuring that sufficient risk-preventative measures are put in place and compensation for those who may be negatively affected.

There are massive potential benefits of shale gas. A shale gas boom in South Africa will result in job creation, a massive boost to the economy, reduction of our greenhouse-gas emissions (by replacing coal), cheaper fuel and electricity and offer opportunities to develop downstream industries, such as petrochemicals (where shale gas can be used as a feedstock), as being seen in the US.

The risks considered are ground-water contamination, high water requirements and waste-water treatment.

The pros and cons needs to be weighed up, but using the US as a case-study, and considering that other countries (e.g. Canada & Poland) will be following suit, the potential rewards to be reaped seem to outweigh the risks (which need to be effectively managed, none-the-less).

The time for acting and developing this massive natural resource and opportunity we have is now.