JOHANNESBURG (miningweekly.com) – Sydney-listed energy group Challenger Energy says it is encouraged by recent indications of a “growing appreciation of the importance” of South Africa’s nascent shale gas industry and its potential beneficial impact to the broader economy, adding that momentum continues to build towards the determination of applications for shale gas exploration.

The oil and gas explorer continued to remain involved in industry consultation regarding proposed amendments to key legislation, specifically the draft Mineral and Petroleum Resources Development Act (MPRDA) Amendment Bill, having last year made submissions to government’s Mineral Resources Portfolio Committee.

It noted in its 2014 annual report that certain of the proposed new terms of the Bill, which was now with President Jacob Zuma for assent, had raised concerns within the oil and gas industry.

“We understand that Mineral Resources Minister Ngoako Ramatlhodi has asked the President not to sign the current Bill until it can be properly reviewed.

“The potential outcomes of this may include either specific provisions for oil and gas, amendments to the legislation or accompanying regulation. This is an encouraging development that should be positive for our industry, and which we fully support,” it noted.

While the group acknowledged the likelihood that “some time” would be required for the proposed amendments to be revisited, it believed the potential benefits of clearer and more appropriate terms for the industry were likely to outweigh this.

“Additional time taken at this stage could well prove worthwhile in the medium  to long term, setting the foundations for a new industry and saving time and money overall,” it noted in its results statement for the year ended June 30.

South Africa’s Karoo basin had become the focus of intense interest in the past few years, following the initial application to explore for shale gas in the basin by oil and gas explorer Bundu – acquired by Challenger in April 2010 – in February 2009.

Challenger, through Bundu, remained the only junior company with interests in the basin, alongside energy majors Shell and Chevron.

The group believed the country’s low economic growth rates and power crisis continued to provide strong motivation for the country’s government to “urgently” pursue potential shale gas resources as a catalyst to transform the economy, underscored by recent announcements from energy utility Eskom of further constraints on large power users to avoid power blackouts.

Alongside the impending legislation, it noted that key policy instruments related to shale gas exploration included the National Development Plan (NDP), the Gas Utilisation Master Plan (Gump), the Integrated Energy Plan (IEP) and the Integrated Resource Plan (IRP).

The NDP indicated the need to enable exploration for coal-seam and shale gas, incorporate a greater share of gas in South Africa’s energy mix, lower carbon
emissions and ensure that 90% of the population had grid access by 2030.

The IRP, meanwhile, highlighted the planned introduction of gas-fired generation into the country’s generation mix.

“This was published in 2011 and is in the process of being updated as a ‘living plan’ to take into account subsequent developments in the energy sector, such as shale gas,” the group said.

The Gump and IEP were being concurrently developed by the Department of Energy.

The Gump had yet to be published, but was intended to provide a framework for investment in gas-supporting infrastructure, as well as outlining the role that gas
could play in the electricity, transport, domestic, commercial and industrial sectors.

“We continue to stay close to the evolving situation in South Africa, and the company continues to progress discussions on a potential farm-in with interested parties,” it indicated.

Challenger posted an after-tax loss of $1.2-million for the year.