Energy giant Shell has moved to punt the economic benefits of shale gas in SA, by commissioning a new study on the subject.
However, not everyone is convinced by the report, produced by Econometrix and released last Friday.
Among its findings is that extracting just a fraction of the estimated shale gas resources in the southern Karoo would contribute R35-billion-R90-billion to government revenue and generate up to 700 000 permanent jobs over 25 years.
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"The possible economic impact of shale gas development in the Karoo is undeniable," Econometrix director Tony Twine says.
"Developments downstream, and induced demand from the income generated by gas finds representing only 4% and 10% of the suspected reserve, could generate massive contributions to GDP (gross domestic product) and create many hundreds of thousands of jobs."
Econometrix also says the report is intended to provide an insight into the economic opportunities that may arise from gas in the Karoo. Estimates are that the Karoo’s shale gas reserves stand at 450-trillion cubic feet, making it the fifth-largest shale gas field in the world.
"This is big stuff in terms of contribution to GDP, in terms of employment potential. Even if the gas finds turn out to be a lot smaller than the estimate - we are talking about a mighty big fish," he says.
The US Energy Information Administration forecasts that shale gas will account for 47% of US gas production by 2035.
But sceptics abound.
A few days after publication of the report, opponents of hydraulic fracturing, also known as "fracking", are dismissing it.
"The report has clearly been commissioned by Shell, which already calls its independence into question. I also have a great problem with the report of two weeks ago from Ipsos Markinor, which showed 85% of South Africans were in favour of fracking, which was also sponsored by Shell," says Jonathan Deal, chairman of the Treasure the Karoo Action Group.
"I am sceptical of anything that is published by oil and industry anywhere that promotes their own interests. They have a history of publishing statistics that suit theoretical objectives which frequently do not represent the true picture."
There is no scientific consensus on shale gas mining. In the US, a debate is raging. Teams of scientist are pitted against each other, contesting each other’s results, says Mr Deal.
"There is no consensus yet on the employment figures in terms of the jobs created and jobs destroyed, where you have agricultural and tourism jobs replaced by mining and drilling jobs," he says. There is also no reliable information on how much gas could be extracted by fracking, Mr Deal says.
"The average gas well yields in the US are depleting so fast that from full yield on its first day, within 36 to 48 months it is offering subeconomic yields."
The Econometrix report omits mention of possible environmental costs, Mr Deal says.
Peet du Plooy of Trade and Industrial Policy Strategies (TIPS), a research institute, is sceptical about the job estimates in the report.
"It is a well-established fact that renewable energy provides more jobs per unit of capacity, unit of energy or unit of investment than any other form of electricity generation. Recent estimates by the Industrial Development Corporation, Development Bank of Southern Africa and TIPS put the total job creation potential for renewables over the long term (by 2025) at just under 120 000 jobs.
"Coal mining, which is much more labour-intensive than ‘mining’ gas, employs around 50 000 people, while one of Eskom’s giant coal power stations employs only 600-800 people. To arrive at 700 000 jobs - more people than are employed in the entire mining sector - the authors would have had to be very liberal in their assumptions and also included indirect and induced jobs."
Mr du Plooy says it would have been tough for such a report to look into externality costs - better understood as risk factors. "For shale gas we are talking about risk - uncertainty regarding costs - rather than cost. If shale gas could be safely extracted it would have lower externality costs in carbon, sulphur and particulate emissions than coal or oil, but higher externality costs (at least in terms of these factors) than renewable energy or nuclear. It would have a lower externalised cost in water use than coal, oil, unsustainable biofuels or solar thermal energy, but worse water costs than nuclear, wind or solar photovoltaic energy.
"How much worse or better is a matter of speculation and depends also on how the shale gas is applied, such as whether it is used to substitute coal-based electricity or coal-or oil-based liquid fuel," he says.
Given that the report was commissioned, any speculation regarding externality costs suffers from a lack of credibility, he says. On the contribution to GDP, Mr du Plooy says the effect of shale gas on competitor industries such as coal should be considered. "Unless all the shale gas is exported, it will replace other industries like coal, leading to a lower net impact on GDP."
He says the report points to a lack of access to electricity as a driver for exploiting shale gas. "This lack of access concerns mostly rural households, and for them the issue is a lack of access to the grid. Electricity from shale gas still faces the same challenge."