Johannesburg - Integrated energy and chemicals company
Sasol [JSE:SOL] has moved ahead with plans to increase its activity in the shale oil industry.
The company on Monday said its wholly owned upstream oil and gas subsidiary, Sasol Petroleum International (SPI), along with Statoil ASA and Chesapeake Energy Corporation have been jointly awarded an onshore petroleum Technical Cooperation Permit (TCP) in South Africa.
"The permit awards the applicants the exclusive right to study the prospectivity for shale gas in the Karoo Basin for a period of up to 12 months, but does not include any surface activity or drilling," Sasol said in a statement.
Sasol said the joint venture partners planned to evaluate existing and available geological information within the area to determine the potential for shale gas.
If the geological evaluation proves successful, the partners would then consider committing to a more extensive exploration programme in the Karoo Basin
"A discovery of large recoverable shale gas reserves in the Karoo Basin will be a game changer in the broader South African energy market context and will likely constitute a major step to further develop gas transmission and distribution infrastructure in the country," said SPI managing director Ebbie Haan.
Sasol said last month that it aimed to actively grow its gas reserves through further exploration and possible acquisitions.
Releasing an update on the group's operational performance, Sasol chief financial officer Christine Ramon said recent technology developments in the cost-effective extraction of shale gas, and resulting lower global gas prices, present a significant opportunity for the expansion of our gas-to-liquids (GTL) value proposition.
Shale gas - a clean natural gas produced from shale, a type of sedimentary rock, mainly consisting of clay and some organic matter - has become an increasingly important source of natural gas in the US over the past decade and interest has spread to potential gas shales in Canada and Europe and now also in South Africa.
The Karoo Basin in South Africa has unproved shale gas potential and significant exploration efforts are required to assess and quantify this prospective resource.
Large gas discoveries in the Karoo Basin could also help alleviate South Africa's power and fuels shortage and assist in creating employment and wealth for the country.
Internationally, new technology to extract shale gas at much lower cost than in the past has resulted in large reserves of natural shale gas being available in the US and such finds are also expected in other parts of the world.
The prospect of additional shale gas reserves has lowered the price of gas relative to oil.
"As Sasol is one of only two companies that can arbitrage between gas and oil through its GTL technology, this development provides a substantial opportunity to grow our GTL business," said Ramon at the time.
At 11:53 shares in Sasol were R1.50 up at 281.40 rand on the JSE. The stock has gained R6.40, or 2.33%, this month to date.
- I-Net Bridge