Energy Crunch Could Force South Africa To Allow Shale Exploration
South Africa sits on the world’s fifth largest shale reserves, but commercial efforts to exploit the resource have been limited because of environmental concerns. However, growing dependence on energy imports could push the government to take steps to promote shale exploration in the country, potentially resulting in another opportunity for Halliburton (NYSE:HAL), the leading provider of oilfield services in the shale gas industry in the U.S. A slowdown in natural gas drilling in the U.S. is pushing Halliburton and its competitors to seek new opportunities in international markets.
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Potential market
According to the EIA, South Africa could hold as much as 486 trillion cubic feet of recoverable shale resources. [1] Companies are particularly interested in the reserves in the Karoo region of the country, which is said to hold significant potential. However, environmentalists are opposed to the move because of the possible impact of exploration in the region. The process of fracking has generated a heated debate in the U.S. and Europe over the repercussions of the process on underground water resources. Opposition from environmentalists has pushed the government to impose a moratorium on shale exploration in the region. The Department of Mineral Resources is set to present a report to the cabinet over the issue.
South Africa’s growing dependence on energy imports could play a crucial role in the outcome of the debate on fracking. The country imports 60% of its oil and gas needs and is also facing power shortages as growth in supply is failing to keep up with demand. [1] Pressure to increase domestic energy output could force the government to look at possible ways to begin shale exploration while balancing environmental concerns. Efforts to exploit shale gas resources in South Africa could result in another international market for Halliburton. Over the past year, countries such as Poland, China and Argentina have announced plans to encourage shale exploration.
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