AMID political tantrums in the US Congress and crony-influenced black economic empowerment codes at home, it was easy to miss last week’s bright spot. The government has finally published its requirements for shale gas exploration.
This opens the way for the long overdue definition of what exactly lies beneath the Karoo Basin. It is a huge step forward. Unfortunately, it also takes some of us back to a sad place.
A fond memory from years in radio was dealing with economist Tony Twine. Accompanied by devoted wife Marilyn, Tony always wore a smile as broad as his mind, bringing his own sunshine into the studio. Peerless on the motor industry and equally adept on energy matters, he never failed to inspire.
Twine, you see, was blind. In his mid-30s, diabetes robbed this gentle intellectual giant of his sight. But it never stopped him from contributing. Whether in public by unpacking economic issues or, privately, through his deep commitment to the philanthropic Rotary organisation.
Fittingly, Tony Twine spent the last nine months of his life trying to bring rationality to a debate threatening to spin out of control. With colleague Rachelle Potgieter, who acted as his “eyes”, Twine studied all he could about the exploitation of shale gas. Hydraulic fracturing. “Fracking” to use the better-known term.
His employer, Econometrix, had been commissioned by Royal Dutch Shell to compile a report to better inform the debate.
Deadlines were tight and Twine pushed himself hard.
The report, dated January 2012, was released at the end of February. It remains the reference point for anyone wanting to understand South Africa’s shale gas potential — and the accompanying risks.
Twine, always understated with words, concluded that exploiting the Karoo shale gas reserves would be a “game-changer” for South Africa. He maintained it would provide an economic boost not seen since the 1950s discovery of the Free State gold fields.
The potential was so mind-boggling Twine tried to tone down expectations. He ran his econometric model on just 10% of what the US’s Energy Information Administration (EIA) had published as the Karoo Basin’s “recoverable reserves”.
Even at this conservative level, the model concluded shale gas would create 850,000 jobs and, for a minimum of 25 years, generate annual economic growth equivalent to 9.6% of 2010’s gross domestic product.
Not surprisingly, he was excited by the model’s findings. But within a fortnight of delivering the final copy, Twine was dead.
Colleague Azar Jammine tells me that his kind, introspective friend was simply incapable of absorbing the hate mail, death threats and personal abuse that followed the report’s publication. Three days after its release he suffered a massive heart attack.
A week later, on Sunday March 11 last year, he passed away.
In the year-and-a-half since, global developments have supported Twine’s conclusions. The EIA’s 2013 annual report says that in the past four years, America’s fracking boom has attracted investment totalling $133bn, mostly in the Marcellus Shale, which runs through the states of Pennsylvania, West Virginia and Ohio. Marcellus houses two-thirds of the US’s 665-trillion cubic feet of “technically recoverable” shale gas reserves.
In its 2011 report, the EIA estimated the Karoo Basin’s technically recoverable reserves at 485-trillion cubic feet. That was updated in the 2013 version to 390-trillion cubic feet, in line with Marcellus, primarily because the US agency reduced the size of the prospective area. Twine’s model was working on 50-trillion cubic feet.
Only now that physical exploration is being permitted are those assumptions to be tested. They may underestimate reality, as everyone is working off very old numbers.
During the 1960s, under instructions from an apartheid government desperate to find oil, state exploration arm Soekor’ s drill rigs pockmarked the Karoo Basin. They found no crude oil. But the results did record masses of shale gas, then considered useless.
It was only in 1998 that an economically viable way to exploit shale gas was discovered. This involves the high-pressure injection of a liquid cocktail of water with some sand and 1% chemicals into the shale, which, in South Africa’s case, is about 3km below the surface. The process causes fractures in the shale to open up, liberating natural gas that is forced to the surface.
As gas is a ready substitute for oil and coal, fracking has transformed the US energy equation.
It has slashed gas prices by half, eliminated the country’s dependence on Middle East suppliers and turned the US into a net energy exporter.
In relative terms, the effect of exploiting a similar-sized reserve by coal-dependent, crude-oil-denuded South Africa is greater.
The EIA says South Africa consumes 610,000 barrels of oil a day, or 220-million barrels a year. A trillion cubic feet of natural gas is the equivalent of 175-million barrels of oil. At the latest estimate of 390-trillion cubic feet, the Karoo deposit is akin to discovering an oil field sufficient to meet the country’s needs for the next 310 years.
Shell, which is ready to invest $250m in six exploration wells, leads the local shale gas charge. It has prospecting rights over an area the size of KwaZulu-Natal, stretching from Sutherland in the Northern Cape to Bedford in the Eastern Cape.
Ten months ago, another of the global oil majors, Chevron, signed a five-year joint venture with Dublin-headquartered Falcon Oil Gas, the Karoo Basin’s first mover.
The third player is Bundu Gas Oil, of which a local consortium owns 10%. Its block includes the Cranemere Project, north of Port Elizabeth, where a gas gusher was hit and then capped when drilled in 1968.
Whatever the reasons for those whose bile flooded Twine’s cellphone and e-mail inboxes, the unintended consequence was tragic.
Tony Twine did not die in vain. His legacy serves as a permanent reminder to all involved in the debate that the best outcomes always flow from measured, rational research and dialogue. Not confrontation.
• Hogg is a writer and broadcaster. He founded Moneyweb and now runs Biznewz.com