Western Cape Business News

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EXPLORATION: Why Shell Will Win In Karoo


Recent Western Cape Business News

THERE is much hullabaloo around Shell’s intention to exploit shale gas in the Karoo. Environmentalists are fiercely lobbying against the ‘fracking’ disastrous extraction process while Shell has a well-oiled PR programme to push its plans ahead.

All of this means nothing in the bigger scheme of things. Shell wants it for obvious commercial gain but, more importantly, so too government’s petrochemical enterprise, PetroSA. The company desperately needs natural gas to feed Mossgas, whose off-shore gas fields are almost past empty.

Then there is also PetroSA’s planned 400 000 barrels of fuel a day refinery planned for Coega, which may come on stream as early as 2014 and which will very likely use the Karoo’s natural gas as feedstock.

It is strange that no focus is being placed on ‘what will happen to the gas’ once is extracted. Many environmental lobbyist have been immersed in stopping the process from happening but has failed to see or take into consideration the bigger socio political and economical facts that have been developing since the early 1980’s. There are dots scattered across the map of South Africa that somehow nobody has bothered to connect.

This is how the dots can be connected. The cost of a pipeline is expensive but not as costly as establishing a new refinery. A nearby refinery to the Karoo gas fields is that of Chevron in Cape Town, but this does not have gas to liquid capability and like most foreign owned refineries in SA., in desperate need of a complete upgrade. It is probably worth considering that currently it may be cheaper for oil companies to import the refined products to SA rather than building a refinery that is reliant on crude oil for the production of fuels and oils.

The closest plant to the Karoo gas fields is PetroSA’s refinery in Mosselbay. The plant was developed by the SA government during the 1980’s and has since its inception proven to be a white elephant, having devoured billions of rands in public money.

The refinery by now should be fully depreciated. Any revenue and profit that will be generated from exploration and the sale of synfuels from PetroSA for SA’s ANC led government will be substantial. It will also support the business case for building the Coega refinery, a project desperately needed to boost job creation in a province which has one of the lowest employment ratios but which is also traditionally an ANC stronghold. The gas fields of the Karoo is a source of ‘natural gas’. This gas is not only used as a source of energy for heating homes or powering electricity generators. These are merely secondary applications of excess product. Primarily, natural gas is used as feedstock for the Gas To Liquid process. The GTL process converts natural gas to synthetic fuels. This has proven to be far more profitable product for oil/energy and exploration companies to supply into the energy markets. There are currently only two plants in SA capable of refining natural gas to liquid petroleum products. Sasol has its GTL plant located in Secunda and PetroSA has its plant in Mosselbay.

A pipeline to Mossgas (and perhaps Coega) will be very lucrative for the ANC’s PetroSA and Shell.

The oil and gas industry all over the world is a dirty business. Mix in some politics and you have a combustible scenario. Why should South Africa be any different?

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