The start of a Moneyweb series covering the proposed exploitation of the Great Karoo.
Supermajor Royal Dutch Shell (RDS) (LSE; Euronext; NYSE) – Europe’s largest petroleum company has designs on a vast chunk of pristine South Africa in what is described as the largest environmentally opposed application in South Africa spanning more than 90 000 square kilometers of the Great Karoo.
On March 15 a road show of public meetings, covering a distance of some 2 000 km and undertaken by environmental consultants, Golder and Associates on behalf of Shell Exploration Company BV, a registered company of RDS; is set to commence in South Africa’s much-loved heartland of the Great Karoo.
Shell is after shale-gas and proposes using a method banned in 116 local authorities in the US, and known as hydraulic fracturing, or fracking. The latest to join the growing concern is Canada’s Quebec.
Breaking News: BNN
In the last 24 hours Canada’s Quebec has banned fracking until government investigations can be considered …a process which could take another two years. In the meantime Quebec gas company shares are reported to have plummeted.http://www.bnn.ca/News/2011/3/10/The-future-of-natural-gas-in-Quebec.aspx
Coinciding with the start of these gatherings, but far removed from the rising emotional tide in South Africa, RDS CEO Peter Voser, will host a live video webcast updating global investors on the groups 2011 strategy on March 15 .
“Geographically this is the biggest environmental story, I am sure” says Chris de Bruyn of North West Eco Forum (NWEF) based in Rustenburg.
From an emotional perspective however De Bruyn believes the 1988 St Lucia dune mining still holds top position.
However, just a few days ahead of the start of a second round of public meetings Moneyweb investigations are revealing that the pressure is mounting and activist big-guns are stepping into view.
Recent names to step into the fracas include globally respected Mariette Liefferink, Acid Mine Drainage (AMD) expert and also CEO of the Federation for a Sustainable Environment (FSE); and Dr Anthony Turton, the 2010 recipient of the Nick Steele Memorial award sponsored by SAB-Miller, for Environmentalist of the Year.
HIVING OFF AFRICA DOWNSTREAM
In a press release issued on February 19 2011 by Geneva-based Vitol, one of the worlds largest independent energy traders, it was announced that Shell had successfully hived off downstream activities in 14 African countries in a $1bn deal to a joint venture between Vitol, and the London-based “independent pan-African private equity investment firm” Helios Investment Partners LLP.
Expressing his pleasure, Mark Williams, Royal Dutch Shell’s Downstream Director said at the time “We will significantly reduce our capital exposure in line with our strategy to concentrate our global downstream footprint…” This meanswhat? According to a report published in Bloomberg on 19/2/11, “Shell to Sell Fuel Marketing in Africa for $1 Billion”, Shell is “targeting asset sales of as much as $5bn this year” having cashed in on “about $30bn of assets worldwide over the last five years”.
South Africa was not a part of this deal so either Shell sees future value or somehow it is locked into contractual obligations. It is speculative, but more likely the former given its shale-gas fracking interest in over 90 000 square km’s of South African heartland.
Nevertheless under “major projects” on the Shell website there is no mention of any projects in South Africa.
Perhaps CEO Voser’s live video webcast on the same day of the start of the second round of public meetings may hold a hint of Shell’s South African plans.
SHELL SA SIBLING SANLAM
Shell SA Country Chairman and CEO Bonang Mohale, who is also a director of Sanlam, which in turn owns 30% of Shell SA (http://www.mbendi.com/coshsa.htm) , recently, in an internal communications message to his staff, pumped up the mantra. CLICK HERE to read the internal message to staff.
After reinforcing the Shell principles and repeating key messages on the shale-fracking exercise, he went on to advise his team that public meetings would re-start, hopefully allaying their fears of a massive public and media backlash.
In this internal document, which found its way into the hands of co-ordinating body TKAG (Treasure the Karoo Action Group), Mohale makes commitments to his staff.
Amongst these commitments he states the intention of Shell to “ …be open, honest and transparent about everything we plan to do in the Karoo”.
This sets the scene for some commitments that defy normal international standards such as “…we will disclose fracturing fluids that we intend using at each drilling location …”
It is a well-documented fact that companies do not disclose all the chemical constituents used in the fracking process and according to Andre Els, a Port Elizabeth drilling consultant who has worked in Iran, the North Sea and Germany, this information is withheld on intellectual property grounds.
WE NEED HEROES
Els testifies to having worked in deep drilling (7km) on the farm Schietfontein in the Aberdeen district of the Karoo in 1967 where he was drilling for oil as an employee of the then Soekor. He recounts that at “12 000 feet” (3 658 metres/3.6 km) he started to experience “caving of the shales” as the layers began to collapse. The drilling fluid stopped circulating to keep the drill string mechanics cool, and unable to circulate, the fluid was lost into the formation through fissures.
“A month later”, Els recalls, “I was sent by the Soekor legal department to investigate a report of discoloration in water emerging from a spring on a farm in the Klipplaat district.”
Klipplaat is outside of Aberdeen and some 37km distant from the drill site.
For Els there is no explanation of how this happened but he knows the two instances are directly related because he was able to recognise the chemical constituents of the drilling fluid …amongst others, tannin acids and caustic soda.
Shell speaks of a depth of 5km but in Els’ case this rupturing and crumbling occurred at 3.7km. He is adamant that not enough is known about the underground aquifers on which the dry Karoo so depends, and to propose drilling and fracking over any part of that area without further investigation would be to be looking for a catastrophe.
As to whether he believes much has changed since 1967 …he says: “fracking is something you learn about in standard five, it doesn’t change. The chemicals may change and the machines may become more powerful, but fracking remains fracking”.
According to Els, there is not enough information on the aquifer system on which the Karoo is dependent for the South African authorities to even try and test the arguments behind the banning of fracking in 116 local authorities in the US, with Quebec the most recent addition.
In the Schietfontein case “loss was not induced but rather a natural loss”, he says, explaining that fracking is “highly pressured at up to 30 000 psi”.
“Shell is going to induce via fracking. That fluid used for fracking will disappear in the cracks and no one knows where that will emerge …it could emerge in the Orange River.”
This he says is a simple basic premise… “if you pump your tyre beyond its capacity it will burst into fragments and the only thing that you will know is that you don’t know where the pieces of rubber are in order to try and fix the problem.”
As to seawater, which has been put forward as an option for the fracking mix, Els says it cannot even be considered. He likens this to the fact that one need only put seawater once into a fish tank and thereafter fill it up with drinking water and it will always remain saline. If this leaks into the aquifers, the Karoo will become a wasteland.
Mohale then goes on to assure his staff that “We will not to [sic] compete with the people of the Karoo for their water needs. Nobody will go short of fresh water because of our operations either in the exploration phase, or if there is any further development.”
In the abundant vastness of the Karoo there is with certainty one scarcity and that is precious water. Fracking to 5km’s below the surface of the earth is going to require significant amounts of water …Shell has yet to provide a satisfactory answer.
*Geraldine Bennett, a former high profile television anchor and energy sector executive, keeps an eye on environmental issues for Moneyweb. She can be reached via firstname.lastname@example.org