Potential infrastructure investment in South Africa

The moratorium o n shale gas exploration in the Karoo, South Africa was lifted in September 2012, allowing for pilot exploration without using hydraulic  fracturing. Some shale gas industry proponents' state, however, that without  using hydraulic fracturing technology in the exploration process, it will be difficult to ascertain a comprehensive and accurate understanding of the quantity of extractable gas in the ground and the cost of extracting it.

Although it has been estimated that a technically recoverable reserve (TRR) of 485 trillion cubic feet of gas (tcf) is present in the Karoo, making it the  fifth largest TRR in the world, the risked recoverable gas in place is likely to be much smaller – and commercial viability and accurate estimates will only be possible after further exploration, writes Energy & Power Systems Industry Analyst, Dominic Goncalves for Frost & Sullivan, growth consulting firm.

Dr. John Decker, Principal Geologist at Petroleum Agency SA, has noted that the amount of gas in place could be vast, but quantitative estimates are currently based on assumptions and very little geological data. Dr. Decker remarked that the risked recoverable gas in place may be in the region of 32tcf. Econometrix modelled two scenarios in their research, using 20tcf and 50tcf, respectively.

Industry opinion  around  pricing reveals a wide range of estimates. Shale gas extraction in the US has caused market saturation  and  has  resulted  in  the  US natural gas market price falling from US$8/MMBTU in 2008, to circa US$4/MMBTU in 2012. Outside the U.S., natural gas prices are much higher, generally ranging from US$9-16/MMBTU. The cost of extraction and pricing of shale gas in South Africa is anybody's guess until significant exploration data is available – likely a range of US$6-16/MMBTU.

The primary applications for shale gas are (1) as a gas feedstock for power generation, specifically for open cycle gas turbine  (OCGT) or combined cycle  gas turbine (CCGT) plants; (2) can be used to develop a local gas market for industrial and residential applications; (3) can be used in the chemicals industry as a feedstock for petrochemical refining to create synfuels in  gas-to-liquid  (GTL) refining, and the manufacturing of plastics, fertilisers, and pharmaceuticals.

Although South Africa's Karoo region may hold the fifth highest shale gas reserves globally, South Africa does not have a large existing natural gas infrastructure, unlike several other countries with shale gas  reserves,  such as the U.S., Canada, Argentina and Mexico. The Karoo is an underdeveloped  region  with a lack of infrastructure. Before a local supply chain for  shale  gas can even be developed, supporting infrastructure  such as roads/rail, water pipelines and gas pipelines to some extent would have to be developed in the region to support shale gas extraction. It is likely that open cycle, or combined cycle, gas turbine power plants would be erected in the region if the supply proved to be economically viable, and supporting transmission and distribution infrastructure would need to be built to evacuate the power out the region to areas of demand.

Shale gas in the Karoo unfortunately holds more questions than answers at this point. Until thorough pilot exploration is conducted, it is unlikely that accurate data will be revealed that will grant an answer as to how much infrastructure development will be needed.

Shale gas basins have differing water consumption  requirements.  Generally  a shale gas well will require 0.5-2 million litresNike Air Max Plus TN