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UPDATE 2-South Africa may award first shale gas exploration licences by end-Sept
May 15, 2017 / 2:15 PM / in 6 months

UPDATE 2-South Africa may award first shale gas exploration licences by end-Sept

* Environmentalists criticised Karoo exploration

* Exploration licences in Karoo valid for three years

* South Africa also pushing for more offshore activity (Adds offshore quotes, recoverable resources)

By Wendell Roelf

JOHANNESBURG, May 15 (Reuters) - South Africa’s government may award its first shale gas exploration licences by the end of September, after environmental objections delayed the process, a senior government official said on Monday.

The five licence applications under review are for exploration in the semi-arid Karoo basin.

Environmentalists criticised plans to work in the sparsely populated region, known for its rugged scenery and home to rare species such as the mountain zebra and riverine rabbit.

Royal Dutch Shell, Falcon Oil and Gas and Bundu Gas & Oil are among five firms whose applications were being reviewed by the regulator, acting Petroleum Agency SA (PASA) Chief Executive Lindiwe Mekwe told Reuters.

PASA would make recommendations to Mineral Resources Minister Mosebenzi Zwane to decide on the licence awards.

“We anticipate that the minister will be in a position to make a determination during the second or third quarter,” Mekwe said.

“If the decision is made this year the exploration rights will be valid for a period of three years, exploration activities should commence within three years,” she said.

South Africa is seeking to replace its dwindling offshore gas reserves and reduce reliance on coal to fuel power plants.

Shell said last year its Karoo project could compete in its global shale gas and oil portfolio provided commercial terms were attractive. It had previously pulled back from the plans due to low energy prices and licence delays.

South Africa’s recoverable gas reserves from onshore shale and offshore gas fields was estimated in 2015 at about 19.5 trillion cubic feet (TCF). Officials say it would take about a decade to significantly develop these gas resources.

Mekwe said Total had applied to renew its offshore exploration licence, but was not expected to drill in the next two years as the French firm continued engineering work for a drill ship to deal with rough sea conditions.

Sasol, Exxonmobil and Impact had received an upgrade in their technical co-operation permits, which entitle holders to conduct desktop studies, to offshore exploration licences, she added.

Mekwe called for more opportunities for black citizens to enter the oil and gas industry, expected to expand once a Mineral and Petroleum Resources Development Bill is finalised.

“PASA is indeed adding weight on black economic empowerment credentials,” Mekwe said. (Editing by Ed Stoddard and Edmund Blair)

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