Written by Chloe Marie – Research Fellow
The Global Shale Law Compendium series addresses legal developments and other issues related to the governance of shale oil and gas activities in various countries and regions of the world. In this article, we will highlight governance actions taken by South Africa to develop policies specific to shale gas development.
South Africa’s economy relies heavily on coal, accounting for about 72% of the country’s total primary energy consumption. Additionally, the country holds 95% of Africa’s total coal reserves, according to a 2015 analysis by the U.S. Environmental Information Administration (EIA). South Africa, however, has very limited proven conventional oil and natural gas reserves but, surprisingly, may have large shale gas reserves. Indeed, EIA estimated shale gas reserves in South Africa to be approximately 390 Tcf in a report dated June 2013, making the country the eighth-largest holder of technically recoverable shale gas resources in the world. At the present time, South Africa is considered to be the thirteenth largest global emitter of carbon dioxide due to its reliance on coal. The development of shale gas resources, as an alternative to coal, may help the country to meet its emissions reduction targets. Shale gas reserves in South Africa are located in the southern portion of the Karoo Basin, which stretches across central and southern South Africa and extends over 2/3 of the country.
Several companies, including Royal Dutch Shell, Bundu Gas & Oil Exploration Ltd. and Falcon Oil & Gas Ltd. quickly expressed an interest in exploring for shale gas in South Africa beginning in 2010. Bundu Gas & Oil Exploration Ltd and Falcon Oil & Gas Ltd submitted applications for licenses to explore in the south-central and central parts of the Karoo Basin, respectively in May and August 2010. Shell also submitted three separate Exploration Permit applications in December 2010 for areas located in the Western Cape, Eastern Cape and Northern Cape provinces.
Subsequently, the South African population expressed deep concerns regarding the potential impacts of hydraulic fracturing on the environmentally sensitive Karoo Basin prompting the government to establish a moratorium on exploration licenses for shale gas in February 2011. Additionally, the South African Department of Mineral Resources commissioned a Working Group to investigate the impacts of shale gas development using hydraulic fracturing in the Karoo Basin. On September 28, 2012, the Working Group published the findings of its investigation and contended that hydraulic fracturing should be approved “under augmented regulation and close control.” As a result, the government lifted the moratorium. As part of their recommendations, the Working Group suggested that the Department of Mineral Resources should establish the “appropriate regulations, controls and co-ordination systems” in a period of time ranging from 6 to 12 months.
In South Africa, petroleum and mining activities are regulated primarily under the Mineral and Petroleum Resources Development Act (MPRDA), which governs upstream hydrocarbon exploration and production, and the National Environmental Management Act (NEMA), which addresses environmental authorizations necessary to conduct hydrocarbon exploration and production activities. Under the MPRDA, the Petroleum Agency of South Africa (PASA), on behalf of the Minister of Mineral Resources, is responsible for granting Technical Cooperation Permits (TCPs) and Reconnaissance Permits (RPs) – allowing operators to conduct preliminary surveys of the location prior to any prospecting or exploration operations – as well as Exploration or Production Rights. Holders of TCPs have exclusivity in obtaining an Exploration Right for the same technical cooperation area; the same applies to holders of an Exploration Right willing to carry out production activities. Permit applicants are required to obtain environmental authorization for petroleum and mining exploration and production rights, including shale gas, under the NEMA. The Minister of Mineral Resources has the power to grant such authorization.
In October 2013, the Minister of Mineral Resources published draft Technical Regulations for Petroleum Exploration and Production in an attempt to adapt and supplement the existing hydrocarbon legal framework in regard to shale gas development. The draft provides for comprehensive environmental and technical guidelines to aid operators in the conduct of hydraulic fracturing activities. As the tensions surrounding shale gas exploration activities mounted, the South African government made the decision to prevent the granting of additional exploration rights until the proposed Technical Regulations were adopted. Applications received and accepted prior to February 1, 2011, were excluded from the moratorium. The South African Department of Mineral Resources adopted and published the Technical Regulations on June 3, 2015.
Interestingly, although Technical Regulations are now in place, the government has not yet granted any exploration permits and is still reviewing pending applications for exploration rights. Recently, however, the government declared in May 2017 that it “may award its first shale gas exploration licenses by the end of September, after environmental objections delayed the process,” according to a media report.
Prior articles in the Global Shale Law Compendium series: