One is talking of possibly some R80bn to the annual GDP and 300 000 potential jobs.
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ALEC HOGG: Let’s move on to that fracking story now, and pick up with David Constable. Earlier in the week the government decided to lift the moratorium on fracking in the Karoo, so we asked David Constable whether Sasol will be getting involved.
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DAVID CONSTABLE: We’ve heard about 485trn cubic feet could be under the Karoo of natural gas. We fully supported the moratorium that was put in place by Minister Shabangu at DMR, for the reason that we need to look for best practices worldwide and world-class regulatory frameworks that ensure safe production and environmentally-friendly production of shale gas in the country.
So that’s happened, we’re very interested and keen to review the findings of the report as Cabinet lifted the moratorium last week, like you said. But also we are keen to evaluate the potential for producing large amounts of shale gas in the country to, like I said, change the energy landscape in the region. Sasol would like to be a part of it if we can do it in an environmentally-friendly fashion.
ALEC HOGG: But you have already put quite a few stakes in the ground with your joint venture – and maybe you could explain this more to us with Chesapeake Energy and Statoil?
DAVID CONSTABLE: Yeah, exactly, in November 2010 we partnered with Chesapeake and Statoil out of Norway and took a technical cooperation permit to evaluate a block of shale gas in the Karoo Basin, outside the main Karoo area. We took that year through November 2011 to evaluate, do desktop studies, and looked at all core samples, and took a decision to not proceed further purely for technical reasons. The rock was not going to be viable for us to produce up there. So, of course, we let that TCP lapse and that was the only reason. We’re definitely still interested in other plays to see if we might be able to move forward with shale gas in the country and, like I said, do it in an environmentally-friendly fashion.
ALEC HOGG: So if, again, to just unpack that a little, was the area that you were exploring not viable, but other areas could be?
DAVID CONSTABLE: That’s exactly right. Like I say, we’re very interested in looking further at other areas which we believe could be much more viable and interesting to us.
ALEC HOGG: Royal Dutch Shell seems to be making all the running there.
DAVID CONSTABLE: Yeah, they’ve got the main block and a lot of it. Probably, like I say, with the numbers that we’re seeing hopefully there’s more than enough to go around.
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ALEC HOGG: The whole idea of exploring or fracking in the Karoo changed when the late Tony Twine, a great economist, did an analysis of it. His colleague, the managing director of Econometrix, Rob Jeffrey, joins us now.
Tony’s work seems to be living on, Rob.
ROB JEFFREY: Absolutely, Alec. It was a great tragedy that Tony passed away but he has left us a great legacy. And I think one can carry that forward from here.
ALEC HOGG: It does appear that the environmentalists who’ve opposed fracking in the Karoo have not gone away, and certainly we were watching today on the eNews channel one of their members saying that they will be taking this to the Constitutional Court. What could it be costing the country if all of this gets delayed?
ROB JEFFREY: Well, in the first instance I think the government has made the right decision. It’s a step in the right direction to lift the moratorium and for the country to be able to establish whether or not this substantial potential gas deposit does exist. There’s something like R485trn cubic feet estimated there, and that would last the country and supply the energy need based on production of energy in 2008 or the demand for energy for something like 200 years. On an ongoing basis, once it has been developed and that will take time – there is an exploratory phase and then a development phase and then obviously you’ve got to go into commercial production – that’s all going to take a considerable amount of time. But at the end of the day, once that is developed, one is talking of something like R80bn to the annual GDP and something over 300 000 potential jobs.
ALEC HOGG: So these are enormous numbers, and due to the work that Tony did and you are continuing with. Government’s mind has been changed.
ROB JEFFREY: Well, one would hope so. That does not mean that one should go ahead. The way one should see it is this is an exploratory phase. During that phase one can establish exactly what the potential benefits are and at the same time consider very carefully certain of the cost potential, environmental risks and costs. Those would need to be quantified as well. Our report put what the potential upside was. That was our expertise.
ALEC HOGG: Rob Jeffrey, managing director of Econometrix. It does appear as though it could be huge. In the full podcast today, which is on Moneyweb, David Constable was talking about Sasol’s investments in this kind of area in North America. They are talking about a gas-to-liquids plant being built in Western Canada. They are also going to be introducing a cracker, which is part of a chemical process, in Louisiana. So massive investments going there all due to the ability to bring out the gas from shale deposits in various parts of North America. It has the ability, David says, of revolutionising the United States, pushing it back into heavy industry again.
Fascinating insight. Let’s see what happens in our country. But it looks like we’ve got the potential too.
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Article source: http://www.moneyweb.co.za/mw/content/en/moneyweb-safm-market-update?oid=611095&sn=2009+Detail