Shell pushes South Africa to end four-year shale gas licence delay

A Shell logo is seen at a petrol station in London January 31, 2013. REUTERS/Luke MacGregor (Reuters)

By Ed Cropley JOHANNESBURG (Reuters) - Royal Dutch Shell pushed South Africa on Wednesday to decide on its application, now nearly four years old, to explore for shale gas in the Karoo, a pristine semi-desert that may contain some of the world's largest reserves. Shell's application in early 2011 for an exploration licence in the Karoo, which the U.S. Energy Information Administration says may hold up to 390 trillion cubic feet (tcf) of technically recoverable reserves, caused an uproar from farmers and green groups, and an 18-month moratorium on the issuing of permits. A year ago, several ministers -- including then-mining minister Susan Shabangu -- suggested hydraulic fracturing, or fracking, exploration licences were about to be issued but none has been forthcoming. The mining ministry has failed to clarify reasons for the delay, either to Reuters or Shell. "Why it is taking so long is a conundrum that we are trying to figure out," Shell South Africa chairman Bonang Mohale told a news conference. "We were hoping that by now we would have at least started the exploration process." With energy firms chasing large natural gas finds in places such as Mozambique, Brazil and China, South Africa could ill-afford to carry on delaying much longer, he added. "Capital is moving," he said. "My guess is that we are probably months away, not years away, from the issuing of exploration rights." The U.S. estimates give South Africa the world's eighth-biggest shale reserves, with nearly two thirds the deposits estimated in the United States. Shell says it is committed to investing $200 million in gas exploration in the area, which lies at the underdeveloped heart of Africa's most advanced economy. A Shell-commissioned study by Cape Town-based consultancy Econometrix suggests extracting 50 tcf of gas would add $20 billion, or 0.5 percent of GDP, annually for 25 years to an economy that has always been a major energy importer. The study also suggests it would create 700,000 jobs, a major draw for a government trying and failing to come up with answers to persistent 25 percent unemployment. Opponents of shale gas fracking say the government has failed to introduce a suitably robust regulatory framework to prevent damage to the delicate environment, ecosystems and water supplies of the Karoo. The spokeswoman for the mining ministry did not respond to requests for comment.