Where angels fear to tread

The reliance by oil and gas companies on stated economic benefits of shale gas may just prove to be their undoing in South Africa.

If fossil fuels in general are a hotly debated topic, then unconventional gas, the newest darling of the oil and gas industry worldwide, must be acknowledged as having the potential to become the single biggest environmental issue in history.

Given that the fossil fuel industry, faced with declining reserves and increasing extraction costs for crude oil, is desperate to maintain its hold on world economies and in light of the alleged benefits of global estimated shale gas reserves, it follows that in 2012 the world will witness powerful multi-national corporations throwing everything they have at pursuing unconventional gas.

What does this mean for South Africa?

Trapped in a web of growing unemployment, increasing energy demands and pressure to slow accelerating climate change, South Africa is faced with a classic catch 22 – do we approve exploration licences for fracking or do we take a long hard look at the material and undeniable facts worldwide?

It was Kenneth E Boulding who said that anyone that believed that exponential growth is possible in a finite environment is either a madman or an economist – and it is on exponential growth that the fossil fuel industry relies.

Accepting that if fracking were to be approved in South Africa, the overriding consideration would be so-called economic benefits, a review of some statements in connection with shale gas mining, by respected South African economists is relevant.

Exhortations to the decision-makers in our government to ‘drill as much as possible, as soon as possible’ appear to be underpinned by their calculations on the benefits of ‘employment on a scale never before seen in South Africa’, and of sufficient electrical energy from shale gas for ‘400 years’.

But there may be a fatal flaw in their calculations, a shortcoming arising from an apparent willingness (based perhaps on an affinity for the blue chip global giants) to accept at face value, almost everything that they are told.

And this of course includes the speculation of exactly what gas reserves lie under South Africa. I use the term ‘speculation’ because that is precisely what it is.

A review of estimated shale gas reserves in the Karoo basin over the last decade yields an erratic set of figures.

Early estimates by the United States Geological Survey (USGS) and the Energy Information Administration (EIA) proclaimed 1000 trillion cubic feet (tcf).

Subsequently, and without explanation, this estimate was reduced by more than 50% and at 485tcf, is 90 times more than that quoted in 2011 by the Chief Geologist of Petroleum Agency of SA (PASA).

These discrepancies alone should be enough to sound a warning to those who hunger for the benefits of shale gas, and who would be prepared to licence the exploration of shale gas in this country on the basis of assumed economic benefits.

The uncertainty and lack of scientific consensus on the gas reserves appears at first to strengthen the hand of the oil and gas industry, with Royal Dutch Shell leading the charge in South Africa.

“It is exactly because of this uncertainty that we need a licence to explore,” says Shell. “If we are allowed to drill exploratory wells we will be able to tell South Africa how much gas is there and if it is worth recovering.” (Shell Upstream Manager – Jan-Willem Eggink).

Yet even that statement reveals that Shell themselves are uncertain of the reserves, or the fact that they may be able to extract the gas in a commercially viable operation.

Given that SASOL withdrew from gas extraction in the Karoo two weeks after being quoted in the press that ‘shale gas was 20 years too early in SA’, and having regard for SASOL’s extensive upstream experience in this country, the determination of Shell to push for exploration is perplexing.

Any discussion on the merits on fracking exploration in South Africa is premature. To even consider licensing a company that has an enormous financial interest and the wherewithal to influence global trends, in the absence of an inclusive national strategic environmental assessment is irresponsible.

The point here, is that if Shell for instance were to explore and discover huge reserves, who would then and under what circumstances be able to halt the march of fracking across South Africa – before it has even been established that what is good for Shell is good for this country?

However, by far the most telling indictment of the estimation of shale gas reserves is a little-known fact that emanates from the mother lode of shale gas – the US.

On 25 August 2011, the USGS issued a report stating that their estimates of shale gas reserves in the Marcellus Shale region are 84tcf of undiscovered, but technically recoverable, natural gas.

The significance of this figure is simple when juxtaposed against the widely accepted value put out for the same region by the EIA – 410tcf.

All at once the previous reserves were slashed by 80% – again without explanation. And this in a region where exploration, drilling, monitoring, and extraction is going on and is measured.

This raises quite plausibly, reasonable doubt as to the oft-trumpeted status of SA as the ‘5th largest shale gas reserve in the world’ – simultaneously casting a spotlight of uncertainty on the predictions of economists who may have based their opinions on untested and narrow data.

Reserves aside, according to a comprehensive economic study conducted by the New York Times, all is not as it appears to be in the shale gas industry.

In a June 2011 article [1], the newspaper, in possession of ‘hundreds of industry emails and internal documents, and an analysis of data from thousands of wells’ stated that “[t]he data show that while there are some very active wells, they are often surrounded by vast zones of less-productive wells that in some cases cost more to drill and operate than the gas they produce is worth. Also, the amount of gas produced by many of the successful wells is falling much faster than initially predicted by energy companies, making it more difficult for them to turn a profit over the long run.”

Employment statistics too, are overstated, as is shown in a 2011 report compiled over ten counties in Pennsylvania – five where shale gas drilling is taking place, and five where it is not licensed.

The net difference in employment between the two data sets is reported [2] as 2.5% or 1348 jobs. The obvious inference drawn is that the unsustainable nature of the limited additional jobs and the damage to environment and public roads creates a net loss for the county.

Clearly there are two sides to this story, but the heavy burden of proving that shale gas extraction makes long-term (including environmentally sustainable) economic sense and that it can be achieved safely and without environmental damage, falls on those who would change the status quo.

It is not good enough to rely on the National Environmental Act (NEMA) and the prescribed environmental impact assessment (EIA) process as a comfort that exploration would be properly managed, because, inter alia, there are no regulations that govern fracking in this country, certainly no trained inspectors to monitor the industry, and scant legal capacity to deal with the likes of the oil and gas industry who have a reputation for polluting, denying and dragging high court actions out for years.

Until there is scientific consensus on this – and many other strategic and local issues relating to fracking – and whilst the technology is under an unrelenting assault from an increasing plethora of bans, restrictions and moratoria [3], our government would be foolish to rush into permitting fracking in South Africa.

[This article follows on from the first article by Jonathan Deal published in Critical Thought,  Oh ignore him that explored the pursuit of fossil fuels in a finite world and the eventual negative effect that this is predicted to produce in the global economy].


[1] http://www.nytimes.com/2011/06/26/us/26gas.html?pagewanted=all

[2] www.foodandwaterwatch.org – (The false jobs promise)

[3] 91 separate places documented as at January 10 2012, and more added weekly

Showing 4 Comments »

  1. The longer we delay the desision to Frack or not in RSA the better informed the decision is likely to be. The history of NEMA and EIAs in RSA has shown that they can NOT manage mitigation of impacts – which inevitably means that South Africans and our natural environment `subsidize ‘ the indirect costs of big business. We can’t afford to be guinea pigs and in the meanwhile lets get on with solar and wind energy.

    Kim of Scenic South

    Comment by Kim Kruyshaar — 16 January 2012 @ 9:56 am

  2. Good piece, but not sure what you are saying about employment (“The net difference in employment between the two data sets is reported [2] as 2.5% or 1348 jobs.”)
    How many jobs were promised and how many materialised?

    Comment by Mike Loewe — 16 January 2012 @ 12:56 pm

  3. Dear Mike, thank you for your comment and your observation. There is a link to the report at the bottom of the page. Essentially, the oil and gas lobby had been trumpeting figures of tens of thousands of jobs – they also make a habit of counting ‘hires’ instead of jobs – so for example if the same position is filled three time during the year as a result of staff turnover, they count it as three jobs. Would have like to spend more time analysing this in the article but space is at a premuim. Best wishes, Jonathan Deal

    Comment by Jonathan Deal - TKAG Chair. — 16 January 2012 @ 1:57 pm

  4. Here is some info on the jobs statistics. Interesting read. http://www.foodandwaterwatch.org/reports/how-new-york-state-exaggerated-potential-job-creation/

    Comment by Jonathan Deal - TKAG Chair. — 16 January 2012 @ 2:43 pm

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