“We don’t have a license yet to start operations in the Karoo, we’re still waiting for the license to be awarded, and the Mineral and Petroleum Resources Development Act is being amended and is still doing its rounds. The minimum commitment Shell makes for this programme is around six wells, which is 250 million dollars,” Shell SA upstream general manager Jan Willem Eggink told CNBC Africa on Monday.
The company’s fracking plans have however given birth to a battle between government, farmers and conservationists. Fracking has also been condemned internationally, and a number of efforts have been made to stall the process.
Eggink however believes that the possibilities for shale gas for South Africa could open up a number of positive commercial prospects.
“What we like about this project is the fact that it really answers the challenges South Africa has. South Africa’s challenges have been outlined very well in the National Development Plan – inequality, poverty, education, unemployment, but also energy,” Eggink explained.
“Are we sure the gas is there? Not at all. There’s a good chance it’s not there, but for that we need to drill these wells. The longer we wait, the longer this potential game changer to South Africa would actually be late.”
The America's Energy Information Administration (EIA), expects the Karoo to have 390 trillion cubic feet of gas, of which Shell plans to invest a billion dollars into its exploration.
“Then we have to test these wells to see how much gas can flow and whether the flow is commercial. Only then can we make an assessment whether there’s a commercial project [or not].”
He added that Shell would also have to take into account the cost of pipelines, and methods to bring the gas to a power plant before the exploration can be regarded as a commercially viable project for the company.
The South African government will also be able to acquire a 20 per cent free carry stake in all major oil and gas explorations that Shell does in the country.
“The experience Shell has in the world is that we’d like to work together with national governments, and this is also what the government has made very clear here. They would like to partake in these ventures, so we actually encourage that,” said Eggink.
“We will come to a conclusion, at the end of this, to a mutually acceptable way of working together in which both South Africa and also the industry will win.”