E&Ps Await South Africa's Approval Of Shale Gas Regulations

South Africa’s government is set to approve regulations for the shale-gas industry that will clear the way for companies such as Royal Dutch Shell Plc and Falcon Oil & Gas Ltd. to press ahead with exploration programs.

“The regulations will go before Cabinet at its next meeting in two weeks” and be published in the government gazette within a month, Mineral Resources Minister Ngoako Ramatlhodi told reporters in Cape Town on Thursday.

South Africa’s semi-desert Karoo region may hold as much as 390 trillion cubic feet of shale gas, which the government wants to tap to alleviate energy shortages. Environmental groups oppose its extraction, saying the process may contaminate underground water supplies.

Companies will have to conduct environmental impact assessments and consult with local communities before drilling, said Thibedi Ramontja, the director-general of the Department of Mineral Resources. Exploration was expected to take about three years, and the process would determine the size of the gas reserves and their economic viability, he said.

A number of issues had been addressed in the regulations, including ensuring that exploration didn’t interfere with an international radio telescope project being developed in the Karoo, known as the Square Kilometer Array, Ramatlhodi said.

Separate legislation regulating the mining, oil and gas industry has been referred back to Parliament, which will address four defects that were raised by President Jacob Zuma when he refused to sign it into law in January.

The Mineral and Petroleum Resources Development Amendment Bill, passed by lawmakers last year, proposed giving the state a free 20 percent stake in all new oil and natural gas projects and enabling it to buy an unspecified additional share at an “agreed price.” Companies including Total SA opposed the provisions, saying they were too vague, would undermine business and violated the constitution.

While Ramatlhodi favors drafting separate laws for the oil and gas industries, he said this would happen at a later stage. “Right now we need to get this bill passed speedily,” he said.

The government has granted 36 mining rights over the past 12 months with potential to create about 6,000 jobs, Ramatlhodi told lawmakers. The mining industry will survive the current slump in commodity prices, he said.