Tag Archive | fracking

SA’s COP21 climate change paper debated

sent to clients 13 October….

All on climate change but not cost…

cop21 logoAlmost always ignored at the recent parliamentary public hearings on the SA COP21 climate change submission was the issue of finances, probably the essential ingredient that should have been debated as part of South Africa’s position in the forthcoming  conference in Paris on intended targets for reduction of greenhouse gases.

After two full days of submissions, with no time for committee member questions from MPs in the light of time restraints and the re-presentation of papers in Xhosa, an impression was gained that there remained the same sharp divide between the providers of statistics that clearly showed what a future world would look like if South Africa and other countries continued on existing paths and those who called for reality in the light of the fact that South Africa is a coal-based economy and will remain so well into the mid-century.

State developmental call only

Surprisingly costs to the tax payer and to business and industry featured little in the proposed department of environmental affairs (DEA) COP22 submission, other than by emphasing the point by investing sooner was a more advantageous position to be in than later, when the cost of “catch up” would be far greater.

The submission is to be South Africa’s call on implementing their portion of 2015 COP agreement from its Green Climate Fund and which reserve fund is supposed to be capable of mobilising $100bn from 2020 onwards.  Also to be resolved is the issue of the immediate sources of funds and to capitalize into reality for use what already exists in the fund.

Maverick viewpoint

The one person who did approach the issue of funds but who fell into the category of a “denialist”Phillip lloyd according to environmental observers, was Prof. Phillip Lloyd of the Energy Institute, Cape Peninsular Institute of Technology, a known detractor of climate change. 

He claimed that in fact climate change issues represented a massive multi-billion industry with a potential turnover of R1,174bn. It was staffed by thousands of NGOs around the world, he said, employees of sensitive international companies, whole government departments and enormous amount of diverted funds that could be put to better use.

He claimed that the current warnings on climate change and “doomsday scenarios” were largely based on unsubstantiated statistics, or at the very least, exaggerated claims. Such funds should be diverted to development, not wasted on pointless conferences, he stated, and technologies that could not hope to meet the demands of growing populations.

Fact or fiction

He showed a graph of rainfall records for England and Wales going back to AD 1750 which indicated a mere 4% rise over the entire period and whilst indeed CO2 emissions , according to him, had increased alarmingly affecting health this was in no way connected to climate change because temperatures had only increased 1%, part of a long process of global warming that went back to the globe’s emergence from the last Ice Age.

Similarly, he noted, rising sea levels had been going on for “thousands of years” but the current level of annual sea rise was dropping in terms of archaeological and geological studies conducted, again over the centuries. He said that the current spend globally on the whole so-called climate change awareness programmes and infrastructure spend amounted to some R15,500 per person globally and “sooner or later this hype had to come to an end”, he concluded.

The chairperson thanked Prof. Lloyd with a sense of amusement.

Developmental help

gridsAnother issue raised regularly regarding the DEA COP 21 submission hearings was the call for capacity building to handle new clean energy resources, a major problem in many developing countries. Financial and technology mechanisms had to be shared and adapted wherever possible, particularly in countries where forced change would stunt economic growth, the paper before them stated.

Most submissions focused on the fact that the two issues had to be in harmony but few could expand how this could be achieved successfully, some submissions just taking the “green at all costs” approach. Nevertheless, in broad terms, all submission except the one acknowledged the urgent need for some sort of structured approach to the agreed need for climate change programmes.

Most submissions also made reference to the activities of Eskom or Sasol in one way or another, referring to such in one case as “the primary polluters in the South African context”.  Subjects brought up varied from fracking to small enterprise farming and renewable energy supplies to carbon capture.

In the one corner….

Greenpeace maintained that listing nuclear energy as “low-carbon” option was disingenuous in that Greenpeacenuclear life cycle in itself was carbon intensive and should not be referred as an energy component for clean renewable alternatives and preferably removed altogether.  

Other predictable submissions came from such bodies as Earthlife Africa and the World Wildlife Fund, who specifically named fossil fuels as the major problem, one of the few times vehicle fuel emissions were mentioned in the two days.

COSATU complained that the use of nuclear energy did not create jobs and would not help the economy in any way but did raise the issue that the effect of global warming was a fact and would be ”devastating as far as employment was concerned”.

The legal view

The Centre for Environmental Rights (CER) stated that South Africa’s negotiating position at COP 21 should succeed in giving effect to section 24 of the Constitution regarding the right to health but they complained that DEA’s long term plans, which included accommodating coal-fired power generation and its highly water-intensive processes had no hope of meeting constitutional requirements unless urgent changes were made.

They pointed out that aside from Medupi and Kusile, the Minister of Energy’s plan to procure an additionalmedupi 2500MW of coal fired power included seven further coal-fired plants yet to be built and which were in the planning stage, mostly in Limpopo and Mpumalanga. Both these provinces, CER said, were highly water stressed areas and had zones already declared as health priority areas due to poor air quality.

Even the right of access to drinking water was threatened in these areas, they pointed out, both issues, air pollution and lack of drinking water in their view representing potential breaches of constitutional privilege.

Top down problems

A number of interesting submissions were made on the problem of local government implementation of climate change mitigation plans.    A particularly important submission came from SA Local Government Association (SALGA), who pointed to the fact that whilst climate change was a national issue and called for a national approach, this did not change the fact that implementation and controls, regulations and planning mostly had to be done by cities and municipalities.

SALGA said there seemed to be no cohesion either in funding or in policy between national government and to some extent provincial government, but certainly not with local governmental authorities. They called for an “enabling framework” that could be adopted in key localised areas and so that “the voice of local government could be heard” by those paying for it.

Methane and fracking

A scientific paper known as the Howarth Report, emanating from Cornell University, was presented by a private individual, Marilyn Lilley, which focused on hydraulic fracturing and the greenhouse gas footprint left by this fracking drilling, the Howarth Report specifically focusing of fracking in the United States of America. Ms Lilley related these findings in her presentation with that of the 200,000sq km area released for fracking ventures in the Karoo.

A quick read of the Howarth Report indicates that in the US during the life cycle of an average shale-gas well 3.6 to 7.9% of the total production of the well is emitted as methane gas. This is at least 30% more and twice the harmful effect as gas extracted from conventional oil wells, the report says.

Also there is a 1.4% leakage of methane during storage and transmission of shale gas. This is the far the most dangerous component of greenhouse gases, the average black smoke emitted from a factory containing on the whole mainly harmless soot, the report concludes. Ms Lilley said that methane was “enemy number one”, adding again that methane had a far greater effect on global warming than any amount of coal fired energy generation.

Methane spouts

Fracking_GraphicShe also said that during the hydraulic fracturing stage of a drilling, which would go to at least 3-4kms vertically to a shale layer and then for approximately 2kms horizontally along the seam, fracturing then takes place with explosives and some 20 million litres of water with silica sand and chemicals pumped in to cause the methane gas to return to the surface with the then toxic water.

She said well pads are usually built 3-4 kms apart in a grid formation and each pad can have up to 30 wells, each being capable of being fracked a number times and each frack taking about 20 million litres of water.

She concluded that fracking whilst be making an unpleasant major contribution to greenhouse gas emissions, the process rather contributed more to global warming which was the actual root problem. She called for fracking and consequent methane gas emissions to be accounted for in South Africa’s COP 21 submission as a subject in itself and for a moratorium to be declared on fracking exploration and subsequent gas extraction.

She also pointed to the fact that disposing of the then toxic water extracted, in some cases needing irradiation, would become an immense and unmanageable waste problem and the light of the distances involved in the South African scenario.

Agri-plans and consequent food processing development

farmingA considerable number of submissions focused on the importance of establishing viable small farming units and a completely self-sustaining mini-agricultural food industry in specially located zones. The proposers suggested suitable cropping of vegetables and staple foods in order preserve the food chain for poorer communities under climate change conditions, the zones themselves contributing to healthier emissions with normal synthesis.

Carbon capture investigation

The South African National Energy Institute (SANEDI), reporting to the Central Energy Fund, gave a report- back on their work in the South Eastern Cape where a pilot drilling project, carried out on-shore for reasons of cost, was exploring the possibility of large-scale carbon storage at sea.    Prof. AD sanedi carbon capSurridge described carbon emissions capture as part of the “weaning off process necessary” whilst the country moved slowly from a fossil fuel based economy to a renewables/nuclear mix.

This pilot storage plant should be running by 2016, SANEDI said, and “commercial rollout possibilities concluded by 2020”.

Marathon run

In closing, Jackson Mthembu, chairperson of the Environmental Affairs Parliamentary Committee, said that “in South Africa, we are known for differing with respect”. This had been the purpose of the hearings, he pointed out.

He concluded by saying that climate change, as an issue, cut across all facets of government and consequently the parliamentary submissions collective summation would be shared across the desks of all Ministries involved.

Other articles in this category or as background

Environmental pace hots up – ParlyReportSA

Tougher rules ahead with new evironmental Bill – ParlyReport

Electric cars part of climate change response – ParlyReport

Posted in Enviro,Water, Facebook and Twitter, Finance, economic, LinkedIn, Mining, beneficiation, Public utilities, Special Recent Posts, Trade & Industry, Transport0 Comments

Gas undoubtedly on energy back burner

Energy mix on gas unresolved…..

LP gasNot one word on gas and gas exploration, gas pipelines or gas as a contributor to the integrated resources plan has passed through Parliament in nearly one year. The last word was in respect of gas, whether oceanic or land-based, was the knowledge that fracking regulations had been published, the dropping of the oil price seeming to cool off any comment and certainly statements by international investors and companies.
President Zuma has, however made passing reference to Operation Phakisa, the plan to develop South Africa’s oceanic resources but most parliamentary reference to this programme has been in reference to the recent press releases by government in the form of a long term wish to build up South Africa’s maritime ability; create an international ship register and regulate for a merchant shipping fleet.
Going back a bit
In a parliamentary question in the National Assembly last year, Mr. S J NJIKELANAa, previously chairperson of the Energy Portfolio Committee, asked for a written reply by the then Minister of Energy on how far gas exploration had progressed and what urgent state intervention was planned, particularly as far as containment of fuel prices was concerned.
The reply came from the Department of Energy (DOE) in a reply that was somewhat evasive in that it summed what everybody knows; that the Integrated Resource Plan (IRP); the Integrated Energy Plan (IEP;) and the Gas Utilisation Master Plan (GUMP) are amongst the measures which were developed to improve South Africa’s multi-source security of energy supply.
The reply at the time gave responses on the then stage of renewable energy aggregating to cumulative contribution of 17800 MW to the IRP’s final estimate of energy from all sources of 40 000 Megawatts (MW). All of this really helped nobody.

Sourcing of energy
The second contributor to the formula was nuclear power contributing a much quoted 9600MW (and now expected to be more) and hydropower at 2600 MW, with“75% of new generation capacity being derived from energy sources other than coal”, it was stated.

 DOE finally got round to GUMP, describing it as “the development of a gas pipeline infrastructure for South Africa’s needs and to connect South Africa with African countries endowed with vast natural gas resources” but at the time DOE was still recovering from the shock of splitting up from environmental affairs and could not separate gas exploration from mining exploration, in that the Department of Mineral Resources was deeply involved. A total figure for gas has not been formulated.

Another problem for DOE.

In reality, the Petroleum Agency of South Africa (PASA) is technically responsible for GUMP although gas exploration seaDOE’s hydrocarbons division seemed to have been lumped with the problem of what has been described by most authorities and energy specialists as an “exciting hope” for solving SA’s energy problems.
In the meanwhile, it has become the poor child of the energy mix, Minister Joemat-Pettersson recently explaining last week DOE’s poor performance and lack of response on the gas issue as being due to short staffing and “too many issues” on hand.

Last definition

GUMP in fact, (when Parliament was last told} would take a 30-year view of the gas industry from regulatory, economic and social perspectives and this was in the final stage of internal approval and was expected to be released for public comment during the second quarter of the 2015 financial year.
The request for IP proposals for gas-fired generation through a gas-to-power procurement programme for a combined 3 126 MW allocation was expected to be released to the market in September this year, with a bid submission phase planned for the first quarter of 2016.

It seems that South Africa’s DOE can only handle one problem at a time. First it was Eskom and electricity and then the nuclear tendering process, which is in fact a very long term solution to South Africa’s energy problem, as put by one member.

Behind closed doors

Gas exploration, as a subject in itself, benefited from a final decision (which in fact is still mostly rumour in Parliament and unreported) that the Minister Rob Davies’s solution not to acquire 20% -25% “free carry” in gas exploration “finds” seems to be the last definitive action to be taken by government on the whole question of gas exploitation and development.

Meanwhile, Minister Joemat-Pettersson, Minister of Energy, was quoted in the media (and we quote tina-joemattEngineering News specifically) as saying that nuclear power was staying at 9600MW and hydropower at 2600 MW.
The Minister added, “We have paid little attention to gas . . . We have been preoccupied with nuclear [energy].  The South Africa we [are] dealing with now is not the same [as the one we dealt with] in 2013 [when many energy-generation plans were put into play]; the scenarios have changed,” she said to the Creamer organisation.

Not on the agenda

In the remaining few weeks of the third parliamentary calendar sessions, no meetings of the parliamentary committee on energy are scheduled for this vital component of the energy mix, although the anti-fracking lobby was particularly evident at a recent energy committee meeting on the five nuclear vendor agreements.

karoo2They were particularly agitated to hear that the South Korean nuclear vendor offers included development of uranium deposits as part of their deal, such deposits known to be in the Karoo. The only movement recently therefore on gas development would seem to be in the area of Sasol development in infrastructure development locally, presumably in pipelines, and a rather “cool” statement from Shell Oil on fracking possibilities in the Karoo related the world price of oil.
The shortage of liquid petroleum gas (LPG) to meet market demand appears to be the only gas issue to coming before Parliament in the near future.
Other articles in this category or as background
Fracking, shale gas gets nearer – ParlyReportSA
Competition Commission turns to LP gas market – ParlyReportSA
Gas Utilisation Master Plan gets things going – ParlyReportSA
Oil sea gas/debate restarted by Parliament
Uncertainty in oil and gas exploration industry

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Fuel price controlled by seasonal US supply

US refinery shut downs affect fuel price…..

US refineryThe current spike in the price of petrol is due of a number of international issues  compounding together but the primary cause is that at this time of year in the United States, a number of major US refineries close down for maintenance in order to prepare for the US summer surge in fuel sales.

This was said by Dr Wolsey Barnard, acting DG of the department of energy (DoE), when he introduced a briefing to the portfolio committee on energy on its strategy for the coming year.

In actual fact, the meeting had been called to debate the promised “5-point energy plan” from the cabinet’s “war room” which did not eventualise, the minister of energy also being absent for the presentation as scheduled. It appeared that the DoE presentation had been hastily put together.

“Price swingers” make perfect storm

Dr Wolsey BarnardDr Barnard said that it could be expected that the price of fuel would be extremely volatile in the coming months due in main “geo-political events” affecting the price of oil, local pricing issues of fuel products and possibly even sea lane interruptions. Price would always be based on import parity and current events in Mexico, Venezuela and the Middle East would always be “price swingers”, he said.

On electricity matters, his speciality, he avoided any reference to past lack of investment in infrastructure, but said that he called for caution in the media, by government officials and the committee on the use of the two expressions “blackouts” and “load shedding”.

Same old story

“Over the next two years”, he said, “until sufficient infrastructure was in place, there would have to be planned maintenance in South Africa” and referred to the situation in the US as far as maintenance of refinery plant was concerned. He said that also “unexpected isolated problems” could also arise with ageing generation installations, during which planned “load shedding” would have to take place.

He said he could not imagine there being a “blackout”.

Opposition members complained that the whole electricity crisis could be solved if some companies would cease importing raw minerals, using South African electricity at discounted prices well below the general consuming manufacturing industry paid, and re-exporting smelted aluminium back to the same customer. They accused DoE of trying to “normalise what was a totally abnormal position for a country to be in.”

Billiton back in contention

One MP said, “Industry was in some cases just using cheap South African electricity to make a profit”. Suchaluminium smelter practices went against South Africa’s own beneficiation programme, he said, in the light of the raw material being imported and the finished product re-exported. “It would be cheaper to shut down company and pay the fines”, the DA opposition member added, naming BH Billiton as the offender in his view.

Dr Barnard said DoE could not discuss Eskom’s special pricing agreements which were outside DoE’s control  and “which were a thing of the past and a matter which we seem to be stuck with for the moment.”

High solar installation costs

Dr Barnard also said that DoE had established that the department had to be “cautious on the implementation of solar energy plan” as a substitute energy resource in poorer, rural areas and even some of the lower income municipal areas.  DoE, he said, “had to find a different funding model”, since the cost of installation and maintenance were beyond the purse of most low income groups.

In general, he promised more financial oversight on DoE state owned enterprises and better communications.   There were plenty of good news stories, he said, but South Africa was hypnotising itself into a position of “bad news” on so many issues, including energy matters. He refused to discuss any matters regarding PetroSA, saying this was not the correct forum nor was it on the agenda.

Still out there checking

On petroleum and products regulation, the DG of that department, Tseliso Maquebela, said that non-compliance in the sale of products still remained a major issue. “We have detected a few cases of fraudulent fuel mixes”, he said, “but we plan to double up on inspectors in the coming months, especially in the rural areas, putting pressure on those who exploit the consumer.” The objective, he said was reach a target of a 90% crackdown on such cases with enforcement notices.

Maquebela added that on BEE factors, 40% of licence applications with that had 50% BEE compliance was now the target.

Competition would be good

On local fuel pricing regulations, Maquebela said “he would dearly like to move towards a more open and competitive pricing policy introducing more competition and less regulations.”

fuel tanker engenOn complaints that the new fuel pipeline between Gauteng and Durban was still not in full production after much waiting, Maquebela said the pipeline was operating well but it was taking longer than expected to bring about the complicated issue of pumping through so many different types of fuel down through the same pipeline. “But we are experts at it and it will happen”, he said.

Fracking hits the paper work

On gas, particularly fracking, DoE said that the regulations “were going to take some time in view of all the stakeholder issues”.

On clean energy and “renewables” from IPP sources, DoE stated that the “REIPP” was still “on track” but an announcement was awaited from the minister who presumably was consulting with other cabinet portfolios regarding implementation of the fourth round of applications from independent producers.

Opposition totally unimpressed

In conclusion, DA member and shadow minister of energy, Gordon McKay, said that the DoEgordon mackay DA presentation was the most “underwhelming” he had ever listened to on energy.   Even the ANC chair, Fikile Majola, sided with the opposition and said that DoE  “can do better than this.”

He asked how Parliament could possibly exercise oversight with this paucity of information.   DoE representatives looked uncomfortable during most of the presentations and under questioning it was quite clear that communications between cabinet and the DoE were poor.

When asked by members who the new director general of the department of energy would be and why was the minister taking so long to make any announcement on this, Dr Wolsey Barnard, as acting DG, evaded the question by answering that “all would be answered in good time”.

Other articles in this category or as background
Energy gets war room status – ParlyReportSA
Medupi is key to short term energy crisis – ParlyReportSA
Integrated energy plan (IEP) around the corner – ParlyReportSAenergy legislation is lined up for two years – ParlyReportSA

Posted in Electricity, Energy, Enviro,Water, Facebook and Twitter, Fuel,oil,renewables, LinkedIn, Mining, beneficiation, Public utilities, Special Recent Posts, Trade & Industry, Transport0 Comments

MPRDA Bill to be amended urgently

Some form of compromise….

coal miningIn referring back to Parliament the Mineral and Petroleum Resources Development Amendment Bill (MPRDA) and acknowledging in his State of Nation Address (SONA) that in its present form it could be damaging to South Africa’s investment climate, President Zuma and his cabinet have introduced more certainty to both the mining and oil and gas industries.

At least a year and a half delay was a guess if the suggestion that two replacement Bills were to be drafted separating mineral resources from oil and gas in the light of the fact that both have separate BEE charters.

Certainty needed

However, mineral resources minister Ngoako Ramatlhodi has agreed with mining companies and also the point put forward by Chamber of Mines that the best and fastest way forward to bring certainty to theRoughnecks wrestle pipe on a True Company oil drilling rig outside Watford industry would be to pass the Bill subject to amendments based on a new approach to the mining beneficiation issue and the matter of state “free carry” in any successful gas exploration.

Originally, on an issue raised both in submissions and by opposition parties and, even a couple of ANC MPs, the presidency has also agreed to doubts expressed whether, once signed, the MPRD Act after amendment would pass constitutional muster on the basis of the amending Bill’s passage through Parliament and the process adopted.

Section 79(1) of the Constitution empowers the President to return a Bill to Parliament for reconsideration if reservations about the constitutionality of the Bill prevail.

Mining land

Subsequently pointed out as a further reason for the Bill not beingtrad leaders signed, raised in a presidency statment issued by spokeperson Mac Maharaj, was a concern of cabinet that the Bill had to be processed through the Council of Traditional Leaders.

Parliament passed the Bill all in a rush at the end of March 2014 after much lobbying by ANC whips and despite warnings and constitutional challenges from many parties.  Nearly a year has passed since sending the proposals off for presidential assent.

The subject of the regulatory environment has not even been touched upon or has come up in the debate at this stage.

During the parliamentary recess both the Chamber of Mines and others have complained of sustained uncertainty in their industries and in the investment world.

Two issues emerged almost immediately when the President announced he was delaying his signature. The first issue was a hefty warning from mineral resources minister Ngoako Ramatlhodi who said “the implications for companies that did not meet BEE targets set out in the mining charter would be severe”, inferring that this might eventually affect the granting of mining licences. He raised, once again, the issue of employee shareholding.

“Developmental” metals pricing

Consequently, it still remains somewhat foggy what government policy was in instituting such clauses other than an overall ambition for the state to have more ownership of strategic resources in both industries and the drive by minister of trade and industry, Dr Rob Davies, to assist smaller manufacturing metals industries becoming more viable at the cost of larger industries, therefore creating more jobs, he said.

On the subject of BEE and the two different charters affected, all that has been said officially was a remark by minister Ramatlhodi “We have to satisfy ourselves that the Act meets our broader socio-economic development activities.”

The second issue to emerge after the announcement of the return of the MPRDA to Parliament was further mention by the department of energy of“Operation Phakisa”, the speed-up process as part of a co-ordination exercise with the oil and gas industry to reduce reliance on oil imports.

Fracking and renewables

On a separate issue, further statements by ministers with regard to fracking and speeding of delays in the IPP world with renewables has also emerged, overshadowed by the urgent need of an energy plan from the newly formed energy “war room”.

Whatever happens, both industries should be prepared for another round of public comment, hopefully in the first parliamentary period after the Budget…… minister of finance Nene notably mentioning nothing of nuclear interest in his budget speech.
Other articles in this category or as background
Energy War Room formed to meet crisis – Parly ReportSA
Mineral and Petroleum Resources Bill halted perhaps – ParlyReportSA
Medupi is the key to short term energy crisis – ParlyReportSA

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Karoo Fracking

Fracking, shale gas gets nearer

Mineral resources gives update on fracking, shale gas

In what appeared to be justification for cabinet’s support of the furtherance of shale gas exploration, director general of the department of mineral resources (DMR), Thibedi Ramontja, told Parliament recently that the discovery of gas deposits in the Karoo “was an exciting opportunity to create jobs and that this was going to make a difference to people’s lives in terms of the NDP”.

He was briefing the select committee on land and mineral resources on the department’s budget vote, his audience representing a different cluster and a more inclusive one than when DMR briefed the National Assembly’s portfolio committee the week before.

Whilst a gazette had been published in February 2014 imposing certain restrictions on the granting of new applications for shale gas “reconnaissance”, DMR said that current approvals did not yet authorise hydraulic fracturing itself.     If this was allowed, “certain amendments” would be made to the appropriate Act.

EIA to come

An environmental impact assessment would be completed in conjunction with the department of water affairs “within the second quarter of 2014/5” to determine “responsible practices” for hydraulic fracturing and to “provide a platform of engagement with stakeholders”.   DMR said that this process would be “streamlined”.

It was noted by DMR in their presentation to parliamentarians that both shale gas exploration and production, together with coal bed methane, will be authorised under environmental impact regulations.

Warning on BEE

The briefing on the DMR strategic plan for five years and this year’s budget vote for the department was preceded by a statement by the deputy minister of mineral resources. Again the warning was conveyed to the mining and petroleum industry that it was generally in default of the mining charter.

With the tenth anniversary of the charter now present, DG Ramontja said, findings by DMR indicated that whilst some targets had been partially achieved in terms of BEE and the charter, others were very much lagging. “Action will be taken”, she said.

Other articles in this category or as background
http://parlyreportsa.co.za//energy/shale-gas-exploration-gets-underway/
http://parlyreportsa.co.za//energy/move-by-minister-to-qualify-shale-gas-exploration
http://parlyreportsa.co.za//energy/fracking-regulations-enhance-safety/

Posted in BEE, Electricity, Energy, Enviro,Water, Facebook and Twitter, Fuel,oil,renewables, LinkedIn, Public utilities, Trade & Industry0 Comments

Shale gas exploration gets underway

Intensive shale gas exploration in Eastern Cape….

The Eastern Cape Departmento f Economic Development, Environmental Affairs and Tourism (DEDEAT) has launched a R16m shale gas exploration across four of its district municipalities, says Mining Weekly. This is the first phase of such exploration.

The department said in a statement that their shale gas exploration plans would extend from the Little Karoo right across to Buffalo City; the Joe Gqabi district municipality, which included the towns of Aliwal North and Burgersdorp; and the Chris Hani district municipality, which included the towns of Cradock and Queenstown towards Graaff-Reinet.

Groundwater reserves being established

The statement said that the initial phase of the project, which had been named Field Level Operation Water Watch, or FLOW2, would create a baseline for shallow groundwater reservoirs in the Eastern Cape ahead of shale gas exploitation, through a groundwater monitoring programme with community-based participation to stimulate capacity building and entrepreneurship.

The department said that the DEDEAT project would essentially determine a forensic analysis of water and gas fracking in the Karoo to determine whether it was safe, cost-effective and beneficial.

In understanding many of the issues and what was not known about shale gas and the extent of the reserves would be assisted and an assessment of the technical skills needed by the provincial economy to increase the benefits of shale gas exploitation made.

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Fracking regulations to enhance safety

Fracking regulations published for comment….

Fracking_GraphicProposed technical fracking regulations on “Petroleum Exploration and Exploitation” have been published by mineral resources minister, Susan Shabangu, stating that the regulations are sought to ensure safe exploration and production methods.

She said on publication, “The purpose of the draft regulations is to augment gaps identified in the current regulatory framework governing exploration and exploitation of petroleum resources, particularly in relation to hydraulic fracturing and prescribe good international petroleum industry practices and standards that will enhance safe exploration and production of petroleum”.

Protection of water resources

Such technicalities are provisions for the following:   Firstly, an assessment of the potential impact of the proposed activities on the environment must be provided; secondly, there must be provision for the protection of fresh water resources; thirdly the protection of biodiversity, palaeontology and the broader environmental impact must be in line with government objectives and, finally there have to be mechanisms for site-specific buffer zone determination for the co-existence of shale gas exploitation and the Square Kilometer Array (SKA) project.

International best practices sought

susan shabangu The mineral resources department stressed, in an earlier statement, that the regulations would ensure that all exploration activities would be “conducted in a socially and environmentally balanced manner”. The gazette in question calls for sound international petroleum industry best practices and standards.

The technical requirements include site assessment, selection and preparation, well design and construction, operations and management; and well suspension and abandonment.

Mid November is given as the date for comments to the department of mineral resources to be concluded.

Refer to articles in this category
http://parlyreportsa.co.za//energy/fueloilrenewables/pasa-ready-fracking-sea-gas/
http://parlyreportsa.co.za//energy/fueloilrenewables/fracking-moves-november-says-minister-davies/
http://parlyreportsa.co.za//energy/chemical-industries-plan-for-training-skills-in-fracking/

Posted in Energy, Enviro,Water, Fuel,oil,renewables, Trade & Industry0 Comments

PASA ready for fracking and sea gas

Gas regulator separate from others….

In a presentation to Parliament, the strategic role of the new Petroleum Agency of SA (PASA) was debated and government officials showed MPs that estimations indicated that at least 20% of PASA’ future effort would be spent on contributing to the legislative and regulatory framework surrounding shale gas in South Africa.

Two major areas of gas and oil exploration revenue for the new body were clearly indicated as income from shale gas operations, or “fracking”, and also from maritime gas investments mainly off the East coast of South Africa, and from current operations on the West coast which were also to be extended, PASA officials said.

Licensing revenue from gas

Current inland petroleum operations and possible extensions of exploration within the main body of South Africa would also continue as a source of revenue, PASA said.

The present mandate of PASA, parliamentarians were told, was to facilitate and regulate the exploration and sustainable development of oil and gas “for the benefit of all South Africans”.     Cash flows from licensing were expected to increase from the forecast R13.7m for 2013 to R147m by 2017 which would be used for oil and gas investments although this was not necessarily ring fenced according to national treasury.

MPRDA includes PASA

The licensing process in terms of the Minerals and Petroleum Development Act, under which PASA falls, includes receiving applications for oil and gas reconnaissance permits, technical co-operation permits, exploration rights and production rights.

In all instances, the major focus, PASA officials indicated, would be to advise and regularly report to the minister of energy affairs on recommendations regarding the industry and “to receive, maintain, store, interpret, evaluate, add value to, disseminate or deal in all geological or geophysical information related to petroleum”, such a data base being the most important part of current work being undertaken.

Skills to be acquired

The future includes the establishment of a force of a number of geologists with specific specialist knowledge, particularly in the near future to support South Africa’s current claim to the international agencies for the extension of its maritime territorial limits.

This is to include some 45,000 km2 off the West Coast of South Africa; about 560,000 km2 in the vicinity of the Prince Edward Islands owned by SA; an area 190,000 km2 south of Madagascar; and the largest area which includes sections of the Mozambique Channel amounting to 1,075,000 km2.

Mozambique Channel

Most of the current litigation involved the application for the area known as “Discovery Ridge” in the Mozambique Channel, where gas deposit realisations are expected to be high.

Income for the new function, other than from “exploration rental” and application for exploration fees, was expected to mainly come from the sale of data but, for the present moment, PASA is expected to operate, for the current year, at a major loss of some R74m as it establishes its mandate, awaits the legal outcome on the moratorium on shale gas exploration and continues to support South Africa’s application to extend its nautical offshore limits.
Refer previous articles in this category
http://parlyreportsa.co.za//cabinetpresidential/to-ignore-fracking-would-be-an-opportunity-lost/
http://parlyreportsa.co.za//bee/mprda-bill-causes-contention-parliament/
http://parlyreportsa.co.za//energy/chemical-industries-plan-for-training-skills-in-fracking/

 

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Parliament: last chance to clean up

Last session of parliament….

Houses_of_Parliament_(Cape_Town)The final gathering of a Parliament is always an auspicious time. This is the thirteenth parliament of South Africa as a republic but currently the fourth under the ANC, this particular parliament having been started in 2009.   How time passes indeed.

Four times five is twenty and nobody can change the fact that this is the number of years we have had in South Africa to get things into first gear and pull away as leaders in Africa.

The poor still out there

But whilst security was always the issue in governments before 1994, service delivery to the poor has been the issue ever since, followed more recently by the need to fill the gap caused by inaction on infrastructure build.   When will the poor actually not be poor seems to be the question and in the case of South Africa the answer always seems to be within our grasp.

As do the energy, rail, transport and harbour, the communications, health and education issues seem to be equally just within our grasp.   Closing that gap is, of course, not helped by the lack of skills and training at the coalface and where it matters.

Up skilling in skills

Aspects to watch in Parliament over the coming weeks involve monitoring the reports of each department’s on the skills training aspect.  Expense was not been spared in the budget. Everybody has been given money. But the “work-hard, focused, skillful, get it done properly” Chinese mentality seems to be missing.

Where the Chinese score is through leadership and therein lies the rub in South Africa, from the top, to the most low worker.

Leadership vacuum maybe

With an extraordinarily long list of legislation to get through in the next session of Parliament it will be interesting to see if the qualities of leadership emerge at all, or the country remains driven, even at cost to basic economic structures, by imperatives to get votes.

Unusual has been the move by the President to return the Protection of State Information Bill back to Parliament, ostensibly in the light of some grammatical errors. Whilst this does not vitally affect the business world, other than perhaps a number of businesses or industries in a strategic role finding itself involved or suspected as being involved in the leaking of some highly sensitive subject – say nuclear or defence, this affair will play out noisily in our newspapers but is not really a serious business issue.

Last minute rush

Meanwhile, the last session of any parliamentary government period will always see MPs distracted by forthcoming elections whilst attempting to handle a voluminous amount of legislation that sincerely affects business and they would like to see passed before the period ends.    Consequently, the expression “fast-tracking” will occur again and again over the coming two months.

Ministers will also make many a speech from a podium aimed at the electorate, rather than adding substance to a legislative issue.  Much will involve sorting the wheat from the chaff when it comes to government policy on critical issues.

Shabangu drops a bomb

Critical issues are obviously the Minerals and Petroleum Resources amendments, bearing in mind minister Shabangu’s recent statement on “free carry” and the ability of the state  to acquire up to 50% shareholding in gas exploration successes; the combining of the liquid fuels and mining BEE charters; land reform; fracking, carbon tax and e-tolling.

Also a certain number of ministers will be attempting to justify their stay in the cabinet and the requirement of pleasing the electorate will feature more heavily on their minds than that of the international investment public. Much will have to be ignored.

This is always a bad period for South African public relations; the political lobby; government relations and for departmental heads who may get rough treatment as they report to MPs on their achievements and as Parliament progresses towards the period of the medium term budget.

Heads down.

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Fracking moves in November, says Minister Davies

Fracking equals jobs…….

frackingFracking for shale gas is under serious consideration by the minister involved and the department of energy, Deputy President Kgalema Motlanthe told Parliament recently, giving his reasons to parliamentarians for this statement as resulting from a cabinet discussion on economic imperatives, the need to create jobs and advance growth.

Minister of trade and industry, Rob Davies, also weighed in on the subject with a comment a few days later.  He also said that the cabinet had discussed the issue recently and they had concluded that the country could not rely just on a tentative upturn in the United States and Europe to help local growth and job creation but must commence its own initiatives.

Lobby for and against

Minister Davies acknowledged that there was indeed a strong environmental lobby against hydraulic fracturing but said government now needed to consider proposals for and against starting exploration in the light of the “cabinet lekgotla that had discussed global economic developments and which had decided to advance the work on taking a decision on the matter.”

Davies said Cabinet believed shale gas could be a vital component in South Africa’s quest for energy security, but at this stage the potential extent of local reserves remained unknown. “It is our intention to move before the end of this administration”, meaning before mid-November when Parliament closes.

Gas nearby

He said that also Mossgas has a resource of about one trillion cubic metres of gas, Mozambique having about an estimated hundred trillion cubic metres with some estimates that the shale gas deposits in South Africa are far bigger.

“If this was the case, this whole question could be a very, very significant game changer in terms of the energy situation in South Africa”, he said.

Handle with care

On the subject of opposition from the Karoo anti-fracking lobbies, he said that government would not proceed in an irresponsible way.  “We obviously have to bear in mind all the environmental implications including, of course, the nature of the relationships with any company that gets any kind of permit – what is going to be the delivery in terms of a positive impact on the economy.”

He mentioned that in an overall picture, the main constraint to growth that requires immediate attention was the energy situation. He said that discussions now were at senior government level.

previous articles on this subject
http://parlyreportsa.co.za//energy/chemical-industries-plan-for-training-skills-in-fracking/
http://parlyreportsa.co.za//cabinetpresidential/to-ignore-fracking-would-be-an-opportunity-lost/
http://parlyreportsa.co.za//energy/move-by-minister-to-qualify-shale-gas-exploration/
http://parlyreportsa.co.za//cabinetpresidential/water-affairs-looking-at-nine-months-to-answer-on-fracking/

Posted in Enviro,Water, Facebook and Twitter, Fuel,oil,renewables, Labour, LinkedIn0 Comments

Chemical industries plan for training skills in fracking

SETAs report to Parliament with training skills update.

On the subject of fracking and in a presentation to the parliamentary portfolio committee on energy by the Chemical Industries Education and Training Authority (CHIETA), parliamentarians were told that major objectives included providing the necessary skills for jobs during the possible exploration for shale gas in the Karoo.

They were also to be part of the exploration process for gas where alternative energy employer were providing jobs and there was a promising outlook for new jobs with specialised skills which CHIETA could provide.

CHIETA is the statutory body established by the National Skills Development Act, through the Department of Labour, one of  twenty three SETAs currently carrying out sector education and training authorities in SA, each being responsible for promoting economic and social development through learnerships and skills programmes.

Gas exploration also under consideration

CHIETA told parliamentarians that the subject of gas exploration and possible new skills needed to develop off-shore gas resources along the West Coast SA and also mentioned also the need for training and skills in upgrading of refineries “to meet new clean fuel standards”. The skills needed “ in consideration of building a new refinery to reduce dependence on the import of refined products” were discussed.

Skills development levies from the petroleum industry at a figure of 95,000 persons far exceeded any other of the category of employer in CHIETA, which ranges from fertilizer to pharmaceutical groupings, of which there were 116,826 employees.

Simple trade related skills represented 50% of the shortfall in the petroleum industry, other than senior professionals who represented another 40%. The presenter talked of an integrate training process that was conducted between SAPIA, the department of energy, CHIETA itself and Johannesburg (Wits) University.

Other training groups report

Two other SETA’s briefed parliamentarians in the form of the Wholesale and Retail SETA who has some time ago signed an MOU with major training group MERSETA and arranged transfer from the latter of 3,256 levy paying companies whom they assumed responsibility for, developing a manual to accommodate fuel retailers downstream.

The levies transferred amounted to R26.9m, transferring also the NQF level 2 National Certificate Service Station Operations qualification and numbers trained with joint exercises with the fuel sector and with grants, amounted to  clerical and administrative workers-227; community and personal service workers-130; elementary workers- 866; machinery operators and drivers – 202; managers- 610; professionals– 62; sales workers– 9,559; technicians and traders workers- 259, making a grand total of 11, 915 persons trained.

The Local Government Sector Education Training Authority (LGSETA) said that their programmes were mainly focused on water and waste water treatment  with a total 1795 candidates  trained in 8 provinces. An electrical training school has been established.

In the same series of presentations, the committee heard from the grouping “Woman in Oil and Energy” presented by Mthombeni Moller .

SAPIA reports for the liquid fuels sector

A briefing by SAPIA on transformation in the liquid fuels industry noted that it was the view generally of the fuel sector that the recently introduced and revised BEE scorecard “made sense” but in welcoming the new BEE amendment bill added to anchor B-BBEE legislation, they gave a warning to legislators and department of trade and industry that whilst penalties might stop “fronting”, the whole process of criminalising such aspects of business development might have “unintended consequences”.

The industry representatives said that the concept of a BEE commission was welcomed for a number of reasons and they told parliamentarians that SAPIA’s plans for the future included an advanced certification in management for oil and gas aimed at middle management persons in transition to senior posts and for trainers to impart to these people specialist knowledge in the oil and gas Industry.

SAPIA called upon the department of energy to take the lead in developing a number of issues in sector transformation including a proper BEE framework for all to work to; revised B-BBEE codes for the sector and technical assistance guidelines to work with that were more specific on certain issues.

Posted in Energy, Fuel,oil,renewables, Land,Agriculture, Mining, beneficiation, Trade & Industry, Transport0 Comments

Integrated Energy Plan (IEP) not crystal ball gazing, says DOE

Department reports to Parliament on energy plan.

It must be understood that the integrated energy plan (IEP) for South Africa  was going to be a “simplistic representation of a number of possible future outcomes encapsulating the state of energy demand and supply that could materialize in light of current policies and macroeconomic trends.  The IEP will not be a representation of a most likely energy future.”

So said Ms Tshidmidzi Ramendozi, chief director, energy planning, department of energy (DOE) when addressing parliamentarians of the portfolio energy committee on the state of the IEP, where the DOE had arrived at in terms of producing such a plan and when it was likely to come about.

Under questioning Ramendozi estimated a final draft in the hands of the cabinet by  the middle of 2013.

The development of an IEP was envisaged in a White Paper on Energy in 1998 and the minister in terms of the National Energy Act of 2008 was then mandated to develop and publish such an IEP on an annual basis. The purpose of the IEP was described in the Act “to provide a road map of energy policy and technology development future energy landscape in South Africa to guide future energy infrastructure investments.”

Seven test cases would be studied in the current exercise, Ramendozi said, which would indicate what could happen if particular actions were taken. She was at pains to point out that such test cases were not really scenario planning exercises, which would have allowed for outside forces or factors over which DOE or those associated with energy generation had no control.

Major factors within the ambit of the planning exercise, she said, for projections in the IEP, were the original energy White Paper; the 2010 integrated resources plan; the national development plan; the new growth plan; the national climate change response paper; the national transport master plan; South Africa’s beneficiation strategy and the proposed carbon tax policy.

Parameters governing the base assumptions were, Ramendozi said, renewable energy targets; the fuel reserve margin; the limits governing annual carbon emissions and the penalties involved.   Naturally macroeconomic factors such as banking rates, economic growth and global oil prices were involved in the assessments.

From this base, for which DOE had to make certain assumptions on GDP factors forecast in the 2012 budget, was to take a middle, moderate growth scenario out of low to high growth patterns, and assume a certain amount of skills restraints into the future.    It also had to assume global oil price projections from the Energy Information Administration and, also to be accounted for, were international projections from the annual energy outlook documents of 2012 in order to establish some sort of formula to go forward.

Assumptions for various test cases could then be undertaken, Ramendozi said, with or without the new nuclear build programme; in one case with existing nuclear structures and one without and mothballing existing structures.  Such would form the basis in test cases one and two.

Then came test cases three and four, at which point Ramendozi referred to the national development plan which had presented a number of factors which had to be borne in mind although these directly affected the integrated resources plan (IRP) and were incidental to the IEP under consideration as far as test cases were concerned.

These factors were that as a net importer of crude oil, South Africa was very much a taker in the oil market and susceptible to fluctuating prices. Also to be considered were the new fuel specifications being considered and the fact that refineries were to be re-equipped to capacitate such and that South Africa would no doubts continue on its path of intensive use of fuel-powered vehicles but improving its national transport system generally.

She noted the options in the national energy development plan, as far as liquid fuels were concerned, and these were as DOE saw it – to build a new oil-to-liquid refinery; build a new coal-to-liquid refinery; upgrade existing refineries; import more refined product or build or buy a shareholding in a new refinery in Angola or Nigeria.  All this had to be considered at this point of the running of test models.

Turning to test case three in the process, Ramendozi said this included expanding existing refineries with greenfields operations. Test case four included upgrading or expanding refineries and possibly, in addition, increasing importation of refined product, allowing for consequent upgrades of port infrastructure and associated costs such as transportation.

Test cases five and six, DOE noted, included the issue of carbon emissions, which was based around South Africa’s international commitment to reduce emissions by 34% by 20120 and 42% by 2025. Factors to be considered were the findings of the long term mitigation exercise involved at the time which had established that South Africa’s energy use emissions constituted 80% of all emissions, 40% of which, a majority on a comparative generating basis, arose from the generation of electricity.

Test case five, Ramendozi said, therefore involved the issues of refurbishing the existing “fleet” of generating plants to meet targets set by the department of environmental affairs (DEA).  This would produce a result for this test case.

However, there was little doubt that such a “retrofit plan would still leave demand outstripping the supply of electricity” so that, as per test case six, the plan to be modelled would involve  “South Africa mothballing its (coal) power plants and investing solely in new technologies as a substitute.”

Ramendozi concluded that the issue of carbon tax finally arose in test case seven. Here, the impact of carbon tax on the choice of energy technologies throughout the entire value chain had to be considered, bearing in mind the DOE was aware of a current proposal to tax emissions of CO2 @ R75 per ton of with an increase of around R200 a ton.

For this modelling exercise and still to be completed, she said, was quality checking of the data collected; the actual configuring of the base for the test cases; subsequent analysis and evaluation and then the final report writing.

Stakeholders would be consulted before a draft report was issued, the draft report being considered first by cabinet before the draft became public.

MPs commented that quite obviously things were still therefore at a very early stage and were surprised that the DOE paper at this stage gave no evaluations of each energy source and no comments on job creation or job losses or skills so far reached.   Ramendozi replied to this, and a number of other similar questions on energy resources, that parliamentarians were confusing the IRP, which dealt with resources and the effects and consequences of their use, with the purpose of the IEP.

It was not the job of the IEP to evaluate and decide upon the quality of resources and their use or not.

The IRP was very much on the subject of electricity energy, she said, to repeated and similar parliamentary questions on coal issues and the future of coal as a primary industry.  Questions on gas reticulation and exploration off the Mozambique coast and what PetroSA were planning, for example, and similar issues in the hydrocarbons area, she noted, similarly involved specific resource evaluations and this was not what the IEP was about. She said the job in hand which looked at the whole sector in a broader sense.

“For example”, Ramendozi said, “when looking at the transport master plan it becomes quite evident that whilst improving rail transport systems, a knock-on result in a broader sense would be a swing perhaps from road to rail, meaning a different call upon the rail electricity need. This would be an IRP issue, however.”

This should answer many parliamentarian’s questions, she said, why there was so little to be said in the IEP on the specific issues surrounding liquid fuels in the planning process.

The IEP was to be a road map and the process leading to building such a plan would yet have to “unpack” many of the issues surrounding energy and the economy from a macro-economic viewpoint.  Such macro-economic issues as job losses and the use or over-use of water, for example, would indeed be in the considerations for individual test case models.

“This is going to be a particularly difficult aspect of preparing the IEP”, Ramendozi said, “because it involves cross-debate with many government departments, including treasury, environmental affairs, labour, health and transport, for example, and the final document needed to be both visionary and re-active to findings and take into account policy matters that had been adopted as courses of action”.

“What the IEP will not be”, she said, “is another IRP which evaluates resources but rather a document which will consider test case models, with or without certain weightings, based on inclusivity or excluding issues, and also to incorporate known supply options with given macro-economic factors.”

She commented, in reply to questions on the effect of carbon tax, that this would indeed be a “challenge” to assess, since whilst MPs saw this as an effect on the purse of the individual, DOE’s thinking on this at this very early stage might be to take the treasury viewpoint that the effect carbon tax could be countered by incentives in the system in the form of allowances, before costs reached the individual.

On augmenting the IEP with the liquid fuels strategy, Ramendozi said, that here again DOE was more concerned with producing transportation and demand factors at this stage. She said, in a similar vein, when asked about the Mathombo project, that her department could not even talk the need for a new refinery, “until we start running the various test case models”.

On questions regarding fracking and gas exploration activities in the Karoo, Ramendozi responded, “With all the geological and logistics issues facing fracking, we are hardly even considering this contribution in terms of the time frame of the IEP. We do not see Shellgas playing an effective role in the energy picture in the immediate future as far as short term test cases are concerned”.

She told parliamentarians that one of the test cases included natural gas related to electricity needs, compared with to gas to liquid technologies. However, she said the whole exercise was not to consider one resource against another but how to complement resources into a common system.

The IEP, she said, “must take on board government policy towards the environment, attitudes toward climate change and therefore such issues and water and water resources used in coal fired plants will have to be considered.   However, social issue answers are not something that will come out of the IEP”, she told parliamentarians.

In many cases we see the final IEP highlighting many issues but not addressing their manner of implementation”, she concluded.

Ramendozi said that in terms of producing the IEP, DOE would consider a reserve fuels margin of 19% and when asked as a final question by an MP what DOE were “going to do about the elephant in the room – the growth rate”, she responded that DOE had to follow exactly what treasury were stating for growth “otherwise all other related data would not make sense”.

Chair, Sisa Njikelana, concluded by saying the IEP presentation was the final document in an “important parliamentary year on energy matters,” stating that DOE had to get the concept behind the IEP right in their minds “before it moved into the nuts and bolts of the various test case issues”.

He said that the energy committee was to put on whole host of questions in writing to DOE based on a forthcoming parliamentary summation of the situation so far on the IEP, and this would be an exercise undertaken once parliament re-assembled in the New Year.

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Hanekom to protect SKA win from fracking fallout

Protecting the Square Kilometre Array

In answer to a parliamentary question on the subject, the new minister of science and technology Derek Hanekom has confirmed that a report is to be undertaken by the department of science and technology and the SKA project team on any possible negative effects of shale gas fracking in the Karoo.

Mineral resources minister, Susan Shabangu, earlier told the media in a press media meeting that government “will approach fracking in the Karoo in a sensitive and responsible manner”.    At this meeting she made public to all the report on investigation of hydraulic fracturing or fracking in the Karoo.

Minister Hanekom’s recent response to MPs questions stated that findings of the research will focus on any negative impacts during the exploration phase and will also be used to inform measures to be put in place “for the exploitation phase.”

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Move by minister to qualify shale gas exploration

Drilling OK but no “fracking”

Mineral Resources Minister Susan Shabangu has said her ministry is to consider Karoo shale-gas exploration licence applications but such would be on the basis of excluding  fracking until the country’s mining regulations had been “augmented” to allow for what hydraulic fracturing involved.

She said that normal drilling could take place as well as geophysical and geochemical mapping but the fracking process itself could not take place during the time it would take draft “appropriate regulations, controls and coordination systems”.    The waiting period to allow for this would be about six months to a year, she said.

The minister did not state when the issuance of licences would commence as a result of the cabinet’s “conditional” approval of fracking exploration at the beginning of September but said that a monitoring committee would be established to oversee the augmentation of the mining regulations, as well as to supervise possible fracking operations.

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To ignore fracking is “an opportunity lost”

Paraphrasing the Working Group task team’s Fracking Report

Because of the uncertainty regarding the extent, or even existence, of economically producible reserves, any assessment of the potential economic impact of fracking is subject to enormous uncertainty”, says the government’s Working Group tasked to report  back on the possibility of shale gas extraction in the Karoo.  The report goes on to add that the economics of “opportunities lost” are so great that it would unwise to halt exploration and research at this stage.

The task team was set up by the minister, Susan Shabangu, last year to investigate the hydraulic fracturing or fracking of shale gas in the Karoo and at the same time, the minister imposed a moratorium on the exploration.

The task team’s report has now been approved by cabinet and the moratorium on exploration lifted but the minister has also said that exploratory fracking would not be allowed during the 6 to 12 months it would take to formulate “appropriate regulations, controls and coordination systems”. (Refer separate report)

While the existence of a significant gas resource in the Karoo would have implications for South Africa’s energy security by reducing national dependence on other fossil fuels, the magnitude of this potential is subject to considerable uncertainty owing to the difficulties in quantifying the resource, the report argues.

Consequently, says the report, “Extensive hydrological and geohydrological studies before exploration and production drilling will be required in order to minimise or eliminate potential impacts.”

The report is also quite clear that the impact on the national economy would be great and the report draws some parallels.

“If 1 trillion cubic feet (Tcf) was sufficient to launch PetroSA’s gas-to-liquids project in Mossel Bay, which provides approximately 5% of the national demand for liquid fuels and now entails 1500-1600 jobs, by making a moderately optimistic assumption that ultimately 30 Tcf will be produced (in the Karoo project) and using an indicative pricing of US$ 4 per thousand cubic feet of gas and an exchange rate of R8 per US dollar, the gross sales value would be almost R1 trillion”.

Aside from the ability to cut South Africa’s reliance on oil imports, the production of shale gas must have, the report assumes, an effect as an economic contributor, to South Africa’s growth “and its GDP would be enhanced by the necessary creation of service industries with all the attendant implications for sales of goods and services.”

Even though this process would be spread over a period of 20–30 years, the report notes that “the production of shale gas would thus clearly have the potential to make a major impact on the national economy.”

On this subject, the report notes that, “Although income tax and royalties accruing to the fiscus depend on profitability, it is expected that such amounts will run into tens or hundreds of millions of rand, augmented by VAT. The potential long-term direct employment opportunities are likely to number in the tens of thousands, with similar numbers in the industries consuming the gas extracted”.

Already, world production of shale gas has sent coal process plummeting down, even to a small degree affecting South Africans exports, although these are much protected from lower prices by the devaluation of the rand. However, the Working Group’s fracking report does not report on the effects on the coal industry or the coal fired energy market but confines itself to the viability and advisability of gas fracking alone.

Nevertheless, commentators note that the USA has cut its oil imports by 20% as a result of fracking.

The report, now released in full after the lifting of the moratorium on fracking but with a limitation on the start date of the hydraulic fracking process itself, is really all about a recommendation to proceed on exploration therefore and undertaking a lot more research particularly on water resources and the hydrological effects of fracking.

This raises the question of how limited the exploration will be from a hydrological viewpoint unless  some sort of limited fracking is done as testing. The second question on the need to draw lines of engagement on environmental issues during the exploration period.

The report notes that initially the projects involved deal with some thirty drilling points using two hectares of land per drill site and this over three years. Most job opportunities will be specialised skills from overseas. The location of the boreholes is yet to be decided.

On the subject of water use, the report says, “Hydraulic fracturing has been used in the oil and gas industry for more than 50 years and, in the last 20 years, together with the practice of horizontal drilling, has been instrumental in making the exploitation of unconventional resources technically and economically feasible.”

It goes on, “The initial stages of exploration can be conducted without the use of (water) reservoir stimulation. However, in order to assess the ‘producibility’ of a resource during the later stages of exploration and, finally, in order to produce the gas, hydraulic fracturing is essential in the exploration process.”

“The process requires the use of significantly large quantities of a base fluid, usually water, together with a small fraction of sand and chemicals pumped into the reservoir with sufficient pressure to create artificial fractures, thereby improving the permeability of the rock and allowing the gas to be produced.”

The report acknowledges that should the exploration period eventually result in large scale production, it is essential that during the earlier exploration period the possible later use of large volumes of water and chemical additives make it essential that the environmental and social implications of this process should be worked out and considered.

Presumably with the acid mine experience from mining operations in Gauteng over the years and with new legislation coming into place to bolt this down, the report remarks “Whereas existing environmental regulations adequately cover most of these factors, an immediate and important concern requiring additional attention is water usage and disposal: in particular, the volume and transportation of the water, the potential contamination of water resources and the disposal of ‘used’ fracturing fluid.

“There has to be further research in this area to investigate all potential sources of input water, as well as means of water disposal before any large scale operation gets off the ground and its seems that the exploration period is part of this. The use and disposal of water in such large amounts is expected to require a water use licence under the National Water Act.”

On dust and air pollution the report seems quite dismissive, saying that, “Noise, dust, emissions and naturally occurring radioactive mineral (NORM) contamination levels will differ at different stages and locations and can be controlled under existing legislation.” There will be no piles of rock and sand, the report says, “as seen in the mining industry”.

“South Africa’s regulatory framework must be robust enough to ensure that, if hydraulic fracturing associated with shale gas exploration and exploitation were approved, any resultant negative impacts would be mitigated”, the report warns.

The report goes into considerable detail regard astronomic effects on the Square Kilometre Array but says in conclusion that this can be controlled by the use of the Astronomy Geographic Advantage Act which clearly can and could control where fracking may and may not be undertaken.

“Astronomy research projects and shale gas in the Karoo may be mutually exclusive”, the report adds, “but the ‘footprint’ of the astronomy installations is only a fraction of the area presently considered to be prospective for shale gas.”

In its summing up, the report measures the “economic values of an “opportunity lost” against concern that the volumes of water required that may compromise other uses for this resource but says whilst the exact “hydrogeology of the Karoo at depth is unknown, potable aquifers are expected to be far removed from shale gas target formations and safe from contamination from injected fracking fluids”.

Presumably that is now is believed by the Working Group and what has to be proven.

Furthermore, the report says whilst the report is working on 30 Tcf, figures of up to 500Tcf have been expressed  and “further drilling, sampling and testing will be required to improve confidence in the existence and, subsequently, extent of the resource. A large resource would have the potential to reduce national dependence on other fossil fuels and may contribute to energy security and the reduction of our carbon footprint. These factors are a powerful justification for further investigation.”

In the event that a real resource is proven, the report adds, “It is possible that its size will be sufficient to justify proceeding to production which maybe coupled with, for example, the establishment of additional gas turbine electricity generation installations or gas-to-liquids (GTL) plants with associated employment opportunities in field operations and plant operation, potentially numbering in the thousands.”

“There would then also be significant implications for the GDP, with as much as R960bn added over 20–30 years. [Calculated at 30 Tcf @ US$ 4/Mcf and R8/US$].

Based on the conclusions set out above, the Working Group “considered a spectrum of options that might be recommended to the minister, ranging from (1) an outright ban; (2) unconditional approval of hydraulic fracturing under the existing regulatory framework.”

“Neither of these extremes was deemed suitable and, thus, an intermediate option (Option 3), specifically the ‘conditional approval of hydraulic fracturing”, was considered to be most appropriate” the report concludes.

Ongoing research is now to be conducted and facilitated by all relevant institutions and appropriate government departments

* the full report is available on http://www.dmr.gov.za

Posted in Cabinet,Presidential, Energy, Finance, economic, Fuel,oil,renewables, Labour, Mining, beneficiation, Trade & Industry0 Comments

Fracking report complete but Minister ponders on result

Minister Susan Shabangu told Parliament during her Budget vote speech said that department of mineral resources (DMR) had already completed its report on the feasibility of shale gas exploration in South Africa. It remained with the department at this stage.

Earlier, various ministers had confirmed that the report on proposals from Shell Petroleum is expected to be with cabinet only in late July.

In a press meeting before she addressed the National Assembly, minister Shabangu said the controversy surrounding the process of fracking was one of the key reasons for the current delay in the passing of the report onwards and how DMR and the department of energy (DME) should position themselves with the results.

She reminded her audience that the proposals at this stage were only to proceed with fracking at exploration level.

Posted in Cabinet,Presidential, Energy, Finance, economic, Fuel,oil,renewables, Labour, Land,Agriculture, Public utilities, Trade & Industry0 Comments


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