Business Live BUSINESS CHRIS BARRON: Let's go fracking, turn on...

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  CHRIS BARRON: Let's go fracking, turn on the shale gas and heat up the economy
  Industry voice frets that delays will put off global companies whose expertise could help reindustrialise SA
  02 JULY 2017 - 00:06 CHRIS BARRON
  
  
  South African Oil and Gas Alliance CEO Niall Kramer says South Africa needs to start setting up a gas economy with LNG imports. Picture: Esa Alexander
  The government has hailed shale gas as a potential "game-changer" for South Africa, but the industry says policy uncertainty and greed will deter the global players critical to its development. The South African Oil and Gas Alliance, which represents the industry, told parliament last month that the 20% state-carried interest proposed in the Mineral and Petroleum Resources Development Amendment Bill needed to be halved to make the industry commercially viable.
  
  The bill needs to be signed into law quickly and on commercially attractive terms, says the CEO of the alliance, Niall Kramer. The global companies he represents are not going to hang around forever.
  
  Options around the world
  
  "These are all explorers who have options around the world. Every year they will look at their portfolio of possibilities and decide which to focus on in the next three-year cycle. If other options offer a more certain and stable legislative environment, then clearly they will go for those." The amendment to the act has been back and forth for more than six years while the government has dragged its feet. Signing it will provide policy certainty and clarity around the terms, Kramer says.
  
  To be developed successfully, the industry needs responsible, experienced global players with the right expertise and finances.
  
  "If they are frightened away by uncommercial terms or lack of clarity and certainty, then who is going to do this?" Anti-fracking lobby groups might not mind if the big multinationals he represents decide to move on.
  
  But with or without them, fracking is going to happen, he says. "There is so much pent-up demand for, and interest in, shale gas that somebody is going to go and do it. Government has sent enough certainty signals that it is going to happen."
  
  No way it is not going to happen
  
  At a public meeting in March, Mineral Resources Minister Mosebenzi Zwane said exploration licences would be issued by the end of September.
  
  Says Kramer: "It seems as if there is no way it is not going to happen. So the most important thing now is to make sure that the explorers who have the experience, wherewithal, knowledge, skills and track record come and do it." He prefers not to speculate on whose interests might be served if reputable companies choose not to get involved. "But when I talk about the responsible, listed, known entities, companies with reputations, who are on stock exchanges, who report quarterly - it's a lot harder to do shady deals with them than it would be with others."
  
  Meanwhile, Karoo residents are alarmed by the size of land concessions granted to exploration companies for fracking.
  
  Kramer says land where fracking takes place will be a fraction of the concessions granted. "If you strip out all the areas in the Karoo where shale gas operations cannot be done because they're towns or villages or nature reserves or close to the SKA [Square Kilometre Array radio telescope project], you come down to a relatively small area where it can be done. "Then you have to look at where it is geologically likely to yield any gas, and then where extraction is likely to be commercially viable." The total acreage under licence application of around 120000km� will be "whittled down considerably", he says.
  
  Limit the damage
  
  Massive technology developments in shale gas and strong local legislation will limit the environmental damage lobby groups warn about, he says. "Where the industry would agree is that the legislation needs better capacitation and enforcement.
  
  "Why you want companies that are reputable and of scale and have done this stuff before is because they will add to capacitation. They're likely to follow the rules, and that will set the tone for everyone else."
  
  South Africa cannot afford to ignore the benefits local shale gas would bring to the economy, he says. "Judging by the US experience, for every job that is created in gas you get a multiplier of three induced jobs."
  
  More important are the jobs that will be created if cheap, indigenous gas can be used to power a reindustrialisation of the country.
  
  "If we have a reliable, stable feedstock that is rand-denominated, not dollar-denominated, that is where the real job-creation opportunities come in. I don't know that South Africa has got any other silver bullet at the moment. This is the one thing that could add a few percentage points onto GDP."
  
  He points out that recently some of the biggest gas finds in history have been made in Mozambique and Tanzania. In Angola, Gabon and Nigeria, massive oil production is under way. But in South Africa - nothing.
  
  "And that is primarily because we don't have an MPRDA framework to give the necessary certainty to these companies. With that in place you have one of the building blocks for an exploration industry."
  
  The other is the oil price and companies' strategy around replacement barrels. The lower the oil price, the less attractive exploration is. Had the government got its act together when the oil price was still relatively high, "I think we'd be exploring by now".
  
  Today's $46-a-barrel price is a negative environment for exploration. "I don't see anyone going to try and produce at these levels.
  
  "This is happy hour for LNG [liquefied natural gas]," he says. South Africa quickly needs to import LNG to Richards Bay, Coega and later Saldanha. This would be a first, significant step towards creating a gas economy, he says.
  
  "What it does is help to establish a gas market, so that people will come to understand what gas is, how you can use it in power to drive industry."
  
  What about the impact of nuclear energy, which the government seems committed to?
  
  "We think we can do shale gas exploration in a shorter period and demonstrate it is viable. If there is no gas in the Karoo then exploration that is done quickly would reveal that, and then we'd need to have discussions about what forms of energy we need."