Johannesburg – The extraction of shale gas in the Karoo could create 293 000 to 704 000 jobs, according to a model that economist Tony Twine developed at Shell’s request.
“The possible economic impact of shale gas is so great that we cannot reject it out of hand. It would probably be bigger than the effect of the discovery of gold had on the country,” Twine said on Friday at an information session on his findings.
“We have to give it careful consideration. This can be done only if we move away from desk-based research to proper digital and more advanced analogue research. To do so, we need to do much more exploration,” he said.
In February 2011 government declared a moratorium on exploration for shale gas and a task group was appointed to investigate the advantages and disadvantages of shale gas extraction through hydraulic fracturing. A task group report will be presented to cabinet later this month.
According to the US Energy Information Administration (EIA), shale gas resources in South Africa are estimated at about 485 000 000 000 000tcf (trillion cubic feet in industry parlance).
Last year the EIA published a report on the latest available international data for shale gas resources. According to this report South Africa, where Soekor discovered shale gas in the 1960s and 1970s, is the fifth-largest resource of the 32 countries in which it occurs.
In his research Twine used two assumptions for his model: where a 20tcf reserve is found and exploited, or a 50tcf reserve is found and exploited.
In both models the reserves are exploited for 25 years, the typical lifetime of a project such as this. During the first five years the rate of production builds up to a production level, which then remains stable for 20 years.
A 20tcf resource would contribute R80bn a year to the country's economy, and a 50tcf resource about R200bn a year. Around nine years of exploration would be necessary before production could start. Production would therefore start to ramp up shortly after 2020 should exploration begin this year.
Commercial extraction of shale gas has increased dramatically in the US, from 0.39tcf in 2000 to 4.87tcf in 2010. This is tantamount to 23% of the US’s consumption of natural gas; but by 2025 shale gas is predicted to provide 47% of the country's gas requirements.
Commercial extraction has become feasible thanks to technological developments – mainly the ability to drill horizontally deep underground and fracture rock at depths of up to 4km below the surface, using chemically treated water that is pumped under high pressure into the fissures.
Last year BHP Billiton, the world's biggest mining company, also adopted shale gas as an important element in its plans for growth.
Twine’s research points out that the shale gas industry historically has huge job opportunities in downstream activities. For each direct job created by the shale gas industry, another three are created in related industries.
Small industries become viable thanks to the availability of gas as a source of energy and lower energy input prices, energy-intensive industries become feasible, a wide range of goods and services can be produced locally and price competitiveness in export markets increases.
Twine however did not take these possibilities into account in his research. “It's very difficult to quantify them. This study focuses, rather, on the direct and indirect quantifiable results, such as growth in gross domestic product, employment and government revenue,” said Twine.
The 20tcf scenario would produce additional state revenue of R35bn a year or R886bn over 25 years. In the 50tcf scenario, the additional state revenue would be R89bn a year or R2 223.494bn over the lifetime of the project.