CSIR frack­ing re­port shows the down­side

CityPress - - Business - ALDI SCHOE­MAN busi­ness@city­press.co.za

If ex­plo­ration for shale gas goes ahead in the Ka­roo, only 60 to 900 jobs will be cre­ated, and it is not go­ing to add much value to the econ­omy if gov­ern­ment, as has be­come the “pat­tern” of late, sim­ply keeps on spend­ing the ad­di­tional tax in­come on pay­ing the salaries of ad­di­tional gov­ern­ment em­ploy­ees.

This is ac­cord­ing to the fi­nal es­ti­mates from the CSIR re­search on shale gas ex­plo­ration, which it car­ried out on the in­struc­tion of gov­ern­ment and pub­lished last week.

The pur­pose of the re­search is to es­tab­lish a frame­work within which the de­ci­sion can be made on whether shale gas should be ex­tracted through hy­draulic frac­tur­ing – also known as frack­ing – should shale gas be found in the ex­plo­ration process.

The Petroleum Agency of SA (Pasa) es­ti­mates that there is 40 000 bil­lion cu­bic feet of shale gas in the Ka­roo, but only through ex­plo­ration can it be as­cer­tained how much gas there re­ally is and whether it can be ex­tracted eas­ily enough to make it eco­nom­i­cally vi­able.

The es­ti­ma­tions in the re­port are based on two sce­nar­ios: “small gas” – if about 5 000 bil­lion cu­bic feet of gas is ex­tracted; and “big gas” – if about 20 000 bil­lion (20 tril­lion cu­bic feet) is ex­tracted.

In the small gas sce­nario, be­tween 60 and 145 di­rect job op­por­tu­ni­ties could be cre­ated. In the big gas sce­nario, be­tween 390 and 900 di­rect job op­por­tu­ni­ties could be cre­ated.

These are small num­bers com­pared with the jobs that are cur­rently cre­ated through agri­cul­ture and tourism in the area.

Agri­cul­ture cur­rently pro­vides 38 000 jobs and con­trib­utes R5 bil­lion a year to the econ­omy.

Tourism cre­ates be­tween 10 100 and 16 400 jobs an­nu­ally and con­trib­utes R2.7 bil­lion to the econ­omy a year.

The con­tri­bu­tion to the lo­cal econ­omy of shale gas ex­plo­ration could be be­tween R3.5 bil­lion and R28 bil­lion a year.

One of the big­gest risks pointed out in the re­port is that gov­ern­ment will use the ad­di­tional in­come from tax to fur­ther in­crease con­sump­tion ex­pen­di­ture. Gov­ern­ment em­ploy­ees’ salaries are in­cluded in con­sump­tion ex­pen­di­ture.

Con­sump­tion ex­pen­di­ture in­creased from 19% in 2007 to 22% in 2013. The most re­cent fig­ure shows it was 20% in 2014.

How­ever, should the ad­di­tional in­come be used for cap­i­tal ex­pen­di­ture such as roads, ports and com­mu­ni­ca­tions net­works, as well as ex­penses that in­clude cap­i­tal and con­sump­tion ex­pen­di­ture such as ed­u­ca­tion and health­care, shale gas could help grow the econ­omy in the longer term.

Peo­ple will have to be ap­pointed to process all the ad­di­tional ap­pli­ca­tions that will ac­com­pany the build­ing and con­struc­tion of the plants. Roads will be used more of­ten and will there­fore have to be re­paired more reg­u­larly, and in­fra­struc­ture such as wa­ter and sewage will have to be ex­tended.

All of this will mean ad­di­tional ex­penses for mu­nic­i­pal­i­ties.

One pos­si­ble so­lu­tion is to charge the com­pa­nies that will be do­ing the ex­trac­tion of the gas a spe­cial levy for us­ing the roads.

The re­port also warns that lessons need to be learnt from pre­vi­ous min­ing ac­tiv­i­ties where re­ha­bil­i­ta­tion of the en­vi­ron­ment is prob­lem­atic af­ter the mines have stopped op­er­at­ing.

These days, reg­u­la­tions stip­u­late that min­ing com­pa­nies have to pay for the neg­a­tive ef­fects on the en­vi­ron­ment.

Ac­cord­ing to the re­port, these reg­u­la­tions will have to be strictly en­forced by the de­part­ments of min­eral re­sources and en­ergy to en­sure that com­mu­ni­ties don’t end up pay­ing the piper af­ter the min­ing com­pa­nies have made their money.

The re­port also con­firms that there is not enough wa­ter in the area to ex­tract shale gas us­ing frack­ing. There is also a risk of wa­ter pol­lu­tion, and it is rec­om­mended that hy­draulic frac­tur­ing not be used in sen­si­tive ar­eas.

Added to this, the pos­si­bil­ity of earth­quakes “can­not be dis­counted”.

The area taken into ac­count in the re­search is the part of the Ka­roo where there are cur­rently five ex­plo­ration ap­pli­ca­tions pend­ing – three by Shell, one by Fal­con and one by Bundu.

The CSIR co­or­di­nated the es­ti­ma­tion to­gether with the SA Na­tional Bio­di­ver­sity In­sti­tute and the Coun­cil for Geo­science, and har­nessed the work of 135 in­de­pen­dent sci­en­tists.

It was launched in Fe­bru­ary last year.

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