western cape intra-governmental shale gas task team

WESTERN CAPE INTRA-GOVERNMENTAL
SHALE GAS TASK TEAM:
YOUR BASIC GUIDE TO SHALE GAS
EXTRACTION AND RELATED SUBJECTS
CONTENT PAGE
1. The Situation at Present ....................................................................... 3
2. Introduction and Context Specific Information ................................ 5
3. Shale Gas and the Extraction Process ................................................ 6
4. The Way Forward ..................................................................................15
5. Uncertainties ........................................................................................ 16
6. Opportunities ........................................................................................18
7. Risk Consideration ............................................................................... 18
8. More Facts ............................................................................................19
9. Official Communication ...................................................................... 20
2
THE SITUATION AT PRESENT
The National Department of Mineral Resources recently released an
executive summary on the Investigation of Hydraulic Fracturing in the
Karoo Basin of South Africa which contains key recommendations. The
report was released after the announcement on Friday 07 September
2012 that the moratorium on the consideration of shale gas exploration,
which was declared in February 2011, had been lifted.
The report that supported this decision contained the following key
recommendations:
• Allow normal exploration (excluding the actual hydraulic
fracturing), such as geological field mapping and other date
gathering activities (e.g.) hydrological studies) to proceed
under the existing regulatory framework.
• Constitute a monitoring committee to ensure comprehensive
and co-ordinated augmentation of the regulatory framework
and supervision of operations.
• Augment the current regulatory framework. The establishment
of the appropriate regulations, controls and co-ordination
systems is expected to take 6-12 months.
• Department of Science & Technology and Mineral Resources
to collaborate in developing mechanisms for the co-existence
of the Astronomy Research Projects and development of shale
gas in the Karoo.
• Once all the preceding actions have been completed,
authorise hydraulic fracturing under strict supervision of the
monitoring committee. In the event of any unacceptable
outcomes, the process may be halted.
• Ongoing research to be conducted and facilitated by relevant
institutions to develop and enhance science knowledge in
respect of the development of Karoo shale gas. This includes,
albeit to limited to, geo-hydrology of the prospective areas,
methodologies for hydraulic fracturing in RSA and environmental
impacts.
• The actions required to give effect to the proposed conditional
approval must be properly resourced, incorporated into the
programmes of the relevant departments and agencies and
capacity developed.
3
THE SITUATION AT PRESENT contd.
The lifting of the moratorium now makes it possible for the Department of
Mineral Resources to consider and decide on applications for exploration
for shale gas in the Karoo Basin. The merits of each application will have
to be considered with due regard to the associated impacts of the
exploration processes.
While the exploration must obtain the necessary approval in terms of the
Mineral and Petroleum Resources Development Act (Act No. 28 of 2002),
approvals will also have to be obtained in terms of the Land Use Planning
Ordinance (Ordinance 15 of 1985), and if listed activities are involved,
environmental authorisation will also have to be obtained in terms of
the National Environmental Management Act (Act No. 107 of 1998).
Even if all the approvals were to be granted, careful monitoring will be
required to ensure compliance and continued good environmental
management.
With a focus on responsible governance, the Western Cape Provincial
Minister of Local Government, Environmental Affairs and Development
Planning requested the Department of Environmental Affairs and
Development Planning to report on the implications of shale gas
extraction in the Western Cape and specifically the Central Karoo District
municipality.
The terms of reference to the Department were:
• to establish an intra-governmental task team to investigate
the opportunities and risks associated with shale gas
extraction; and
• to convey the task team’s findings in a report to be
submitted to the Western Cape Cabinet to inform policy
debates.
With a focus on responsible governance, the Western Cape Government
wants to encourage on-going and informed debate on the issue of shale
gas exploration and extraction.
4
INTRODUCTION AND CONTEXT SPECIFIC INFORMATION
The recovery of shale gas by hydraulic fracturing has sparked considerable
debate and reaction from various stakeholders globally, including South
Africa. At the heart of this debate is the tension between the anticipated
economic benefit and the potential environmental and social impacts
which accompany shale gas extraction.
South Africa’s economy is energy intensive. The energy mix is dominated
by coal-derived electricity for industry and domestic use, direct coal use
in minerals refining and petroleum-based products for transport.
South Africa has made an international commitment to reduce its 2020
carbon footprint by an amount equal to 34% below a business-asusual scenario. Currently, about 50% of the country’s greenhouse gas
emissions (GHG) are from electricity production, a further 20% from the
metallurgical industry, and 10% from transport (Devarajan et al, 2009).
The national Integrated Resource Plan (IRP, 2010) for electricity generation
proposes to effectively double the country’s current electricity generating
capacity by 2030. About 40% of this additional installed capacity will
come from renewable energy (principally wind and PV solar, with a
smaller contribution from hydro), with the total proposed contribution of
gas only about 7%.
Natural gas represents a significant opportunity for further economic
development in the Western Cape (and South Africa). It strengthens
energy security and will support regional development through its use for
power generation, minerals beneficiation, synthetic fuels and chemicals
production.
These investment opportunities can be realised in the short to medium
term separately from the production of shale gas by utilising available
known gas sources, such as off-shore gas fields in Mozambique and
Tanzania or off the West Coast between Cape Town and Namibia.
Therefore, investment in imported liquid natural gas (LNG) at this time will
help to establish downstream markets that can become available for
(potential) shale gas production in the future.
5
SHALE GAS AND THE EXTRACTION PROCESS
Shale gas occurs in compact rock formations with low permeability,
compared to conventional gas resources that occur in porous rock
formations trapped below layers of impermeable rock formations. Due
to its low permeability that do not allow for easy circulation of the gas in
the rock, the flow and recovery of gas are achieved through the process
of hydraulic fracturing at depths of between 4000 m and 5000 m along
vertical and horizontal wellbores.
Hydraulic fracturing is the process where a mixture of water sand and
chemicals tailored to suit the target rock formation, is forced into the well
at extremely high pressure to fracture the formation and to stimulate the
flow of gas to the surface (Steyl et al 2012). The Karoo is a water-stressed environment, and there are no surface
water sources with sufficient water for hydraulic fracturing, even at the
prospecting phase. Each stage in a multi-stage fracturing operation
requires around 1 100 – 2 200 m3 of water; the entire multi-stage fracturing
for a single well requires about 9 000 – 29 000 m3 of water, with chemical
additives of up to 2% by volumes, that is, about 180 – 580 m3. For all
fracturing operations carried out on a six well pad, a total of 54 000 –
174 000 m3 of water would be required for the first hydraulic fracturing
procedure and, with chemical additives of up to 2% by volume, that is,
about 1 000 – 3 500m3 of chemicals (Minnesota Department of Natural
Resources, 2012).
Figure 1 below illustrates the typical activities associated with shale gas
extraction. This is schematic only, and different options exist for delivering
water to site, injecting the hydraulic fracturing cocktail, and removing
waste water.
2
It must be noted that amounts of water used, as well as the volumes of flowback water,
differs significantly in the international literature quoted in this report. This is to be expected
based on differences between geological formations, technologies used, drilling depth,
etc.
6
SHALE GAS AND THE EXTRACTION PROCESS contd.
Figure 1: Typical activities associated with shale gas extraction
(source: US EPA, 2011)
At the conclusion of the fracturing procedure, fluid returns to the surface
as ‘flowback’. Fracturing fluid components of significant concern are
gelling agents, surfactants and chlorides; others are dissolved solids,
metals, biocides, lubricants and organics. Shale formations may contain
acid-producing minerals (e.g. sulphides), naturally occurring radioactive
materials (NORMs) and other toxic metals (e.g. copper, aluminium,
cadmium, arsenic, lead and mercury). The mobility of NORMs and metals
and their potential to impact on groundwater are increased when they
are dissolved or suspended in fracturing fluids that are brought to the
surface.
Fluids that are recovered range from 10 - 75% of the volume injected
depending on the site (US EPA 2011). Accordingly, each well on a multiwell pad will generate between 1 300 – 23 000 m3 of flowback waste fluid
containing water, fracturing chemicals and subsurface contaminants
mobilised during the process, which includes toxic organic compounds
heavy metals and NORMs. Similarly, any flowback fluid that is not
recovered remains underground where there is concern that it is, or
may become, a source of contamination to other formations including
aquifers.
7
Figure 1: Extent of Shale Gas formations in South Africa
8
The figure below reflects a limited number of exploration areas that are distributed across three precincts.
The exploration will last approximately one year. The map below also identifies the areas that have been identified
for these explorations.
Step 1: Create access roads (if needed) & prepare drilling pad.
9
Steps in the Exploration (including hydraulic fracturing)
& Shale Gas Production Process
Step 2: Bring in drilling rig & drill a vertical well, & then drill horizontally
outward into the layer of shale (~30 days).
Steps in the Exploration (including hydraulic
fracturing) & Shale Gas Production Process
10
Step 3: Bring in the water & pump trucks, undertake hydraulic
fracturing, & manage flow-back (~20 days).
11
Steps in the Exploration (including hydraulic fracturing)
& Shale Gas Production Process
Step 4: Remove fracturing equipment, secure well & site.
Steps in the Exploration (including hydraulic
fracturing) & Shale Gas Production Process
12
Step 5: Install pipeline to a storage facility and ultimately to the market.
Steps in the Exploration (including hydraulic
fracturing) & Shale Gas Production Process
13
• Rehabilitate the site
• Plug the well
• Decommission the well pad (remove equipment)
Step 6: At the end of production life of a well:
Steps in the Exploration (including hydraulic
fracturing) & Shale Gas Production Process
14
THE WAY FORWARD
Now that the moratorium has been lifted, the commencement of any
exploration operations will be subject to various statutory approval
processes. Adherence to the statutory requirements of the relevant
environmental legislation constitutes part thereof.
In general, the National Environmental Management Act, 1998 provides
the framework for environmental management in South Africa that gives
effect to the environmental right as contained in the Constitution. In
particular, the environmental management principles contained in the
National Environmental Management Act provides guiding principles for
informed decision making.
Applicants are now able to submit applications for exploration rights to
the competent authority for consideration. The table below lists:
• the type of decision to be concluded;
• the competent authority who concludes the associated
decision; and
• the legislation guiding competent authority during decision
making.
DECISION
COMPETENT AUTHORITY
LEGISLATION
Environmental
Authorisation
DEA&DP / National Department of
Environmental Affairs
NEMA
Atmospheric
Emission Licence
Land use zoning
departures
Provincial Department on behalf
of District Municipality
Relevant local authority
NEMA: AQA
Land use zoning
departures appeals
Provincial competent authority
LUPO
Rezoning
applications
Provincial competent authority
LUPO
Water licence
National Water Affairs
Water Act
LUPO
15
UNCERTAINTIES
There are a number of uncertainties and information gaps that makes
it difficult and in certain instances not possible to accurately determine
the profile of certain opportunities and risks. The lack of information on
the receiving environment (especially the subsurface environment), as
well as the nature and extent of development, makes it difficult to clarify
the consequences (extent) of opportunities/risks and the likelihood that
these opportunities/risks will occur.
The potential contribution of shale gas to South Africa’s energy mix needs
to be examined in light of the risks and present uncertainties associated
with development of this resource. Apart from the obvious one (is
there any gas in the Karoo; and if so, is it an attractive development
proposition?) there is a need to clarify those uncertainties which preclude
a definitive assessment of the attendant socio-economic benefits, as
well as the environmental and social risks. Beyond that, there is a need to
understand the extent to which these underlying risks can be mitigated.
The key uncertainties and information gaps include:
• The size and nature of the shale gas reserve. This in turn will influence
well density and roll-out during the production phase, that is, how
many and their areal extent and the rate of production. Many
of the potential positive and negative impacts associated with
shale gas extraction can only be quantified once this information
is known;
• A better understanding of the impact associated with the use of
available and changing (best practice) technologies;
• Improving our understanding of the receiving environment,
especially the geohydrological environment. The chemical and
physical properties of the subsurface environment will influence
the chemical properties of the flowback and production fluid,
and the potential environmental impacts associated with their
management;
• Determining the institutional context that will be needed to
support the implementation of a shale gas industry.
South
Africa does not have adequate capacity (knowledge/skills,
human resources, technical equipment and financial resources)
at any of the institutional levels in government (i.e. municipal,
provincial; and national spheres) to deal with the anticipated
general servicing, regulation and compliance monitoring and
enforcement that will be associated with shale gas extraction;
16
UNCERTAINTIES contd.
• Understanding the socio-ecological implications (now and
in future) related to shale gas operations and considering the
nature of the receiving environment;
• A significant investment will have to be made to establish the
necessary infrastructure and create the institutional capacity to
maintain this expanded infrastructure;
• Determining the sources of water and sand that will be used during
the hydraulic fracturing process, both during the exploration and
production phases are not known;
• Understanding the chemical properties of the hydraulic fracturing
fluid that will be used and the implications thereof;
• The method of waste water treatment and final discharge during
the prospecting and the production phases.; and
• The legacy of managing well integrity in perpetuity to prevent
well failure is poorly understood.
These challenges are interrelated, and the short and medium term focus
should be on information gathering - an expanded knowledge-base is a
prerequisite for any future decision regarding shale gas in South Africa.
17
RISK CONSIDERATIONS
The risks and uncertainties involved are listed below:
Hazards
Benefits
Financial and Human Resources
Country does not have the capacity at any
institutional level to manage the anticipated
general servicing of the industrial processes.
Ground water impacts
Sound baseline information must be
gathered regarding the volume and quality
of water sources that are currently utilised for
domestic and agricultural purposes before
any exploration is undertaken. A strategic
assessment of the use of deeper aquifers for
alternative long term beneficial use in the
area should be done.
Water treatment and disposal
Standards for treatment need to be put
in place for the contaminants not already
considered under legislation. The re-use and
flowback and production water must be
implemented. Dedicated treatment facilities
need to be put in place before exploration
and production takes place.
Greenhouse Gas Emissions
Technologies need to be investigated and
implemented in order to reduce the GHG
emissions from these activities. A life-cycle
assessment of emissions from energy sources
needs to be developed in order to determine
the impact of shale gas on South Africa’s
energy picture and as a transitional fuel to a
low carbon economy.
Air Pollution Impacts
A proactive approach must be taken that is
focused on the avoidance of environmental
impacts (air quality and noise). This can be
achieved through the development of site
selection criteria.
Heritage Resources
A strategic planning approach should be
followed to ensure that sensitive landscapes
and specific sites are avoided. Impact on Biodiversity
The general recommendation is to exclude
protected areas from shale gas exploration
and production activities and related
infrastructure development in general.
Socio-economic impacts
Pursue active community engagement to
ensure that communities are capacitated
to participate meaningfully in public
debates and regulatory processes.
18
MORE FACTS
The emergence of natural gas as an economically viable resource
and recent developments in technology for recovery of fossil fuels from
reservoirs with low permeability, such as hydraulic fracturing, has turned
the spotlight on the exploration potential of Karoo sediments (Steyl et al
2012). Though available geoscientific data is limited, current estimates
suggest that the Karoo Basin has a commercially viable recoverable
resource, that is, about 30 trillion cubic feet (Tcf) to about 500 Tcf. Figure
1 below shows the geographical extent shale rock formations which
could potentially be targeted the shale gas exploration and extraction.
It also depicts the areas for which the Department of Mineral Resources
(“DMR”) has recently allocated operating permits for exploration to 5
companies.
Operator Permits (TCPs)
Shell
185,000km2
Sasol /
88,000km2
Chesapeake
/ Statoil
Anglo Coal
50,000km2
Falcon
30,000km2
Sunset
4,600km2
Total
357,600km2
Figure 2: Extent of the shale formations in South Africa, as well as the coverage of
the Operating Permits (USEIA, 2011)
19
OFFICIAL COMMUNICATION
It is important to note that only authorised officials may divulge any
information on this matter. The subject of shale gas extraction will be
managed in terms of the Media Policy of the Department of Environmental
Affairs and Development Planning.
Contact:
Media & External Relations:
Aziel Gangerdine
+27 (0)21 483 4643
+27 (0)71 866 9887
[email protected]
Technical:
Paul Hardcastle
+27 (0)21 483 5687
+27 (0)82 889 9065
[email protected]
Gerhard Gerber
+27 (0)21 483 2787
+27 (0)83 226 9127
[email protected]
Disclaimer: This document is intended for informational purposes only and does not
constitute legal, technical, business or other advice and should not be relied on
as such. Please consult a professional advisor if you have any questions related to
the topics discussed in the report. The Western Cape Government does not make
any express or implied warranties, or assumes any legal liability for the accuracy,
completeness, timeliness or usefulness of any information contained in this document.
The photographer owns the Copyright for all images used herein.
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PRODUCED BY :
Western Cape Department of Environmental Affairs and Development Planning
Utilitas Building, 01 Dorp Street, Cape Town, 8001
Private Bag X9086, Cape Town, 8000
Website: www.westerncape.gov.za/eadp