Shale Gas A Long-Term Hope
BMI View: Shale gas regulations would provide clarity for investors seeking to tap South Africa's shale gas potential. However, we note the investment certainty this provides could be undermined by an unappealing incentive structure provided by a proposed Minerals and Petroleum Development Amendment Bill that is being considered. Domestic concerns about the environmental impact of fracking could also stall the passing of the bill. Shale gas production is likely to remain a long-term prospect that would only have a material impact beyond our ten-year forecast period to 2022.
In an important move, the Cabinet of South Africa proposed a new set of regulations that would govern shale gas exploration and production (E&P). The new framework comes just over a year after South Africa lifted a moratorium on hydraulic fracturing (fracking) opening the door to investment in tapping the country's sizable shale gas deposits , which recoverable gas resources US Energy Information Administration (EIA) estimates could be as large as 10.9trn cubic metres (tcm) . Expressions of interest have already come major international oil companies like Royal Dutch Shell which have pledged significant investment.
The proposals target regulations surrounding hydraulic fracturing (fracking) in particular, to ensure that it would be conducted 'in a socially and environmentally balanced manner', according to the Department of Mineral Resources' official press release. This draft regulation covers the following:
Tapping Shale Gas Potential EIA's Estimates Of Countries With The Largest Shale Gas Potential (tcm)