From an agricultural perspective, oil, gas and fertiliser prices are interrelated, and affect a farmer’s ability to cultivate lands.
Lower prices here allow a farmer to plant marginal lands that would have not been otherwise viable. Increased economies of scale lead to use of more productive technologies, higher yields, greater bargaining power and increased profitability. Lower energy costs also make the transport of your products to consumers cheaper.
From an industrial perspective, a developing country such as South Africa needs a competitive electricity tariff, and a long-term, secure supply for industrial development and investment. And the exploration of gas could be critical to the prosperity of our country.
Commercially viable gas reserves in the Karoo could diversify our energy mix, which is currently heavily dependent on coal.
Gas turbine electricity plants have a shorter construction time and would balance our national electricity supply grid, and inject much-needed economic stimulus into the rural economy of Karoo towns, where employment opportunities are desperately needed.
SA also has the ability to convert gas to liquid petroleum products. The more locally produced petroleum we can manufacture, the less crude oil we have to import. This will benefit our trade balance with oil exporting countries, with more money staying in our borders and circulating and creating jobs in our economy.
Gas turbine plants also emit less carbon dioxide than coal power plants. The demand for coal is increasing, especially from developing nations in the East. This increased demand will continue to put upward pressure on the price of coal, with negative price risks for electricity locally. Our over-dependence on cheap coal could become a liability if we can’t rapidly diversify our energy mix. There are some concerns as to the chemicals used in extracting gas from the shale rock.
But scientists and engineers continue to develop new methods and technologies as environmental risks and concerns needs to be addressed. We can all educate ourselves with more data, facts and less unfounded emotion on this issue. Is all the environmental paranoia justified?
And what about mineral rights? Some communities have grown rich on royalties from platinum reserves on their lands. Ownership of mineral rights is a contentious issue continuously being challenged in SA courts. But surely farmers have a legal, fair and rightful claim to a portion of the mineral deposits on their lands and should be compensated accordingly?
In addition, exploratory drilling will be disruptive and farmers will have to be compensated. I believe it’s imperative that exploratory drilling starts as soon as possible, so that we can determine the economic viability of shale gas in SA.