Karoo fracking prospecters say they remain highly optimistic about the future of the sector and are proceeding with exploration despite concerns about low oil prices.
It is widely thought that cheap oil makes alternative fuels, often with high initial extraction costs, less economically viable. A recent PwC report says: “Shale gas, in particular, could move forward if the gas price were not 100% linked to oil”.
But according to Robert Willes, managing director of Australia-based Challenger Energy, whose subsidiary Bundu Gas and Oil Exploration was the first company to apply for shale gas exploration rights in the Karoo, a longterm oil price scenario needs to be considered.
“Firstly, the exploration and appraisal phase of the project is expected to take a number of years, during which the longerterm oil price scenario is likely to become clearer.
“Secondly, in the interim, the cost of exploration may be reduced as oilfield service companies become more competitive.
“And thirdly, we expect that a substantial proportion of the market for shale gas in South Africa is likely to be for power generation,” he said.
Willes does, however, caution that this cost competitiveness depends on an exploration and appraisal programme which should accurately determine the extent of the resource and its economic viability. Already, several inconsistencies as to the true size of gas reserves in the Karoo have emerged.
A 2011 estimate by the United States’ Energy Information Administration put the technically recoverable gas resources in the region at 485 trillion cubic feet (tcf). This was later revised down to 390tcf in 2013. According to the Petroleum Agency South Africa’s (PASA) estimates, only 40tcf is expected to be recoverable.