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What Shale Gas Means to Southern Africa

March 30, 2012


Shale Gas is a rather unsexy but game changing opportunity. How do I know, because, I can talk with firsthand knowledge of its impact on the community. The reason being, I live smack-dab on top of the Barnett Shale formation, the first great shale gas play in the U.S. and, for that matter, the world.

Also, I must confess, that most of my career in the energy industry has been with renewables, mostly with hydrogen, waste-to-energy, biomass, solar and wind. So by design, I am not in love with fossil fuels.  But what I am, is a realist. As I search for the best energy solution today, I keep coming back time-and-time again to Natural Gas.

So today, I will take you on a brief journey that begins with opportunities and challenges and ends with clarity and solutions.


As I previously mentioned, I live within the Barnett shale formation, which has about 6,000 operating wells out of 15,000 drilled. My house is a very short distance, about 4 tenths of a kilometer (0.4 km /1/2 mile) from a recently completed well.

These pictures were taken mid-November 2011. As you can make out, the pad site is relatively large, about 1.7 hectares (4.3 acres), and has sufficient space for future expansion.

What’s most obvious is the temporary 10 meter high (32’) sound and screening wall, surrounding the entire site. For security purposes, there is only one access point with a battery of warning signs. Everything looks well-organized and properly managed.

This photo was taken a month later. The rig is gone, and the site is fairly barren except for the 3 or 4 remaining wellheads.

Once the delivery pipelines are connected to the wellheads, the sound wall will be dismantled after construction of a 3 meter high decorative masonry fence around the entire pad. At that point, the site will blend in and actually enhance the curb appeal of the neighborhood.

#3 – SHALE GAS: VISION for Today

This conference is all about your vast shale gas energy opportunity; it’s not a fantasy but a vision that can benefit the entire region today, not tomorrow.

Natural gas production, from hydrocarbon rich shale formations, known as “shale gas,” is one of the most rapidly expanding trends in onshore oil and gas exploration and production today.

What you have is an abundant domestic resource base estimated to about 485 Tcf of technically recoverable shale gas resources. In fact, you’re sitting on the 5th largest shale reserve in the world. An excellent position to be in!

Secondarily, natural gas is clean; in fact the cleanest of all fossil fuels. Certainly, being an organic compound, it has a carbon footprint. But as you can see from this chart – its emissions levels of CO2, CO, NOx, SO2, particulates and mercury is anywhere from 40% to 100% cleaner than coal.   (click – remove chart and bring down top)

Furthermore, the economic impact from developing shale gas has a multiplier effect far beyond just the supply chain from wellhead to exports.

This “Shale Gale” as we call it in the U.S. has the potential to support more than 1.6 million jobs and generate about $933 billion in tax revenues over the next 25 years.


So what can shale gas do for you?

First and foremost, as with any energy source, shale gas must be produced in a manner that prevents, minimizes and mitigates environmental damage, the risk of accidents and protects public health and safety.

Now, using the U.S. as an example, natural gas has transformed the outlook of U.S.’s energy mix.

It’s had a profound economic impact on: • creating jobs, • reducing consumer cost of natural gas and electricity, • increasing federal, state and local tax revenue • stimulating economic growth • and reducing GHG emissions and smog

Specifically, U.S. shall plays:

• contributed about $77 billion to the nation’s economy in 2010

• supported 600,000 jobs.

• introduced higher paying jobs, higher than those in manufacturing, transportation and education

• and added about $1,000 in disposable income per household.


Natural gas has gained wide acceptance not only because it is a cleaner-burning, and more easily transportable energy source, but because it is competitive to other fossil fuels.

This chat compares the value of various fuels, each normalized to 1 million BTUs.

In this respect, at 20 cents per therm for natural gas, which is its current trading price, the comparative cost for:

for electricity is 8 tents of a cent per kWh,

for bituminous coal 63 dollars per ton

for fuel oil #2  better known as, home heating oil, about  0.28 cents  per gal

and for propane about 18 cents per gallon

What this means, if you are paying higher for anyone of these fuels, than that shown in the chart, using natural gas, will save you money.

With improved distribution channels and technological advancements, natural gas is being used in ways never thought possible.

Natural gas has many applications, commercially, in the home, in industry, and even in the transportation sector!

Industrial uses include providing the base ingredients for such products as plastic, fertilizer, anti-freeze, and fabrics.

And well known to your country, is the conversion of natural gas into synthesis gas for production of liquid hydrocarbon fuels.

And because of the attributes mentioned above, natural gas has replaced coal as the preferred source for electrical generation and heating in homes, businesses and industrial furnaces.

In terms of exports, it is projected that the United States will become a net exporter of liquefied natural gas in 2016.

#6 – The Triple Bottom Line

When you put these benefits together, you get what is called the Triple Bottom Line, an integration of values for measuring success: success in terms of economic, ecological, and social benefits.

To Southern Africa, shale gas is an endeavor of national social responsibility.

This is in regards to: People – in terms of an improvement towards labor, the community and region Planet – in terms of benefits towards the ecology and the environment and Profits – in terms of real economic benefits enjoyed by the residential, commercial and industrial sectors

It’s pretty magical to develop a resource that benefits these somewhat conflicting constituencies


Now, you’re at a crossroad.

A crossroad of how to balance the tremendous quantity of undeveloped resources, with the complexity of developing an infrastructure to support demand, while protecting the community and the environment

From a supply side, once developed, you will have sufficient resources to satisfy current domestic requirements. However, to make this work, there must be a broader market for the gas, both domestic and international.

Here we see South Africa’s energy mix.

Clearly, your economy is heavily dependent on coal, and at the other end of the spectrum; we see that natural gas plays a very minor role.

This is a logical outcome of your vast coal deposits and limited natural gas and petroleum supplies.

This chart illustrates South Africa’s coal production, consumption and exports from 1950 to 2007.

The upper “red” curve shows South Africa’s total coal production, with the white area, below,  your coal export market.

The upper black curve, designates your country’s total coal consumption; primarily consisting of liquid fuel manufacturing and electricity generation, in the orange and tan sections, respectively.

Clearly electricity generation is the country’s primary consumer of coal. Therefore, this sector can immediately benefit by developing your shale plays. As the demand for electricity grows, new gas-fired electrical power generation stations can replace the need for coal-fired plants.

In the U.S., the Levelized cost of gas-fired stations is about 6.6 cents per kWh verses 9.5 cents for coal-fired plants. A double benefit by using natural gas – cheaper and cleaner electricity production!

Long-term opportunities to stimulate demand include developing an infrastructure supporting natural gas fueled vehicles.

You’re now proceeding slowly with due caution. Your dilemma is how best to manage the risks to the community, environment and economy while developing a valuable asset and markets.


Let’s depart for the moment and clarify issues raised by industry critics and concerned citizens.

New gas developments bring change to the environmental and socio‐economic landscape, especially where gas exploration is a new activity. With these changes have come questions about the nature of shale gas production, and the ability of the current regulatory structure to adequately protect the people and the planet.

Purported issues include its impact on:

• human health and safety

• the environment

• fresh water reserves

• air quality, and

• seismic activity.

All valid concerns to think first and drill later!

To these ends, regulatory agencies, policy makers, and the public need an objective source of information on which to address these issues.

Now let’s, step forward and demystify a few critical aspects of development and separate fact from fiction.

# 9 – The Process of Shale Gas Development

In order to make sound decisions about exploration, it is important to understand the development process.

As you can see from this slide, the process begins with mineral leasing and permitting followed by the more obvious phases of site preparation, drilling, completion, and hydraulic fracturing, then finally to plugging, abandonment and restoration.

The drilling process from site prep to production, is relatively short, averaging about 3 months per well.

In fact, the hydraulic fracking phase is the shortest of all events, lasting only a couple of days.

The entire process up to workovers, can take several years. The rate liming step is typically, the initial phase, of mineral leasing with its negotiations of lease terms between the mineral owner and mineral developer.

Though permitting can be an arduous and uncertain task. At the end of the day, the permit may even be withheld, by anyone, of a number of regulatory agencies including the local government.

# 10 – The Big Picture

Downstream, natural gas goes through a series of selling, transmission and distribution processes, before reaching the customer.

This sets the stage for both opportunities and challenges. Opportunities, in terms of, jobs, economic value, and government revenue! And downstream challenges in developing an adequate infrastructure and stimulating demand.

This requires, developing:

• processing plants,

• compressor stations

• storage facilities both above and underground • pipelines,

• compressor substations (every 80 to 160 km)

• an underground network of smaller pipelines called “mains” then finally to

• even smaller lines called “services” that go directly to the end-user

And in the case of the export market, expanding and building natural gas liquefaction plants.

#11 – Hydraulic Fracturing

A key element in the emergence of shale gas exploration has been the refinement of cost‐effective horizontal drilling and hydraulic fracturing technologies.

These two processes, along with the implementation of protective Best Management Practices, have allowed shale gas development to move into areas that previously were not accessible.

Both horizontal drilling and hydraulic fracturing are established technologies with a significant track record; horizontal drilling dates back to the 1930s and hydraulic fracturing has a history actually going back as far as 1860’s, when nitroglycerine was used to stimulate shallow, hard-rock oil reserves, it was surprisingly very successful and not so surprising very hazardous and often illegal.  Definitely would have enjoyed seeing that from a distance.

Anyway, let’s begin with hydraulic fracturing, simply because it’s essential to shale gas production and central to many controversies over its development.

The fracturing fluid is a proprietary mixture consisting of at least 98% water and sand with the remaining 2%, or less, of chemical additives, each having a specific function.

Although there are dozens to hundreds of chemicals, which could be used as additives, typically, there are no more than 12 chemicals used in the fracturing process.

Most of the additives are commonly used household or personal care items, which pose little or no health risks.  However, a limited number are hazardous, and only one routinely used additive, ethylene glycol, is poisonous if swallowed in sufficient quantities. It is important to note that ethylene glycol is widely used as automotive antifreeze agent .

To this end, the ingredients of the fracturing fluid must be transparent. Legislation should be put in place to: have the operators disclose the makeup of the fluid.  Also, of prime importance, are the corresponding regulations to ensure proper injecting and disposal methods.

#12 – Groundwater Protection

Pure, clean groundwater! Nothing can replace it. This is why fresh-water aquifers need to be protected through obligatory use of construction methods and oversight.

Protection is afforded by casing and cementing, where casing isolates fresh water zones from inside the well and cementation seals the annular spaces within the casing to create a hydraulic barrier to fluid migration.

It is required to have of 4 layers of steel casing that is fully encased in concrete. There can be as much as 3 million pounds of steel and concrete that travel, literally, 10s of thousands of feet. And during the drilling phase, proper legislation requires testing throughout the process.   In addition, there are natural barriers in the rock strata that act as seals holding the gas in the target formation.  A fundamental precept of shale gas geology is to ensure sufficient separation and effective sealing between the shale layers and overlying aquifers.

It is important to mention, that credible investigations into complaints of water contamination attributed the problem to poor casing construction and cementing as well as the close proximity of the shale layers to underground water supplies.  Also, inadequate Fluid Management including handling, injecting and disposal were also to blame.

As we will shortly see in the next slide, there are new methods to improve the quality and reduce the quantity of the fracking fluid and wastewater.

So to adequately protect people and the planet, there needs to be a Regulatory Framework that addresses every aspect of exploration and production, such as:

• the geology and potential seismic activity

• site selection

• casing and cementation

• contractor qualification

• ground water testing – both before and after drilling

• and public disclosure of chemicals.

#13 – Water Usage

Multi-stage fracturing is water intensive and can use up to 20 million liters of water per well. Therefore, it is critical, that large quantities of fresh water are available.

This chart shows the comparative water usage, by sector, of several major U.S. Shale Plays.

Here we see that shale gas production, represented by the shaded column, is, in fact, the lowest consumer of water. Public systems, are by far, the primary demand sector. And where heavy industry is present, industrial and mining operations, also require substantial quantities of water. Even the irrigation and livestock sectors utilize more water than the shale gas industry.

Most of the water used in hydraulic fracturing comes from surface water sources such as lakes, rivers and municipal supplies.  However, groundwater can be used to augment surface water where it is available in sufficient quantities and quality.

Alternate strategies include trucking in the water, building ponds and reservoirs to capture rain, employing “green” frack components and better ways to treat and recycle the waste water.

Finally, with new technologies to the rescue, such as “super fracking,” as it’s called, it is possible to reduce water consumption in half.

These are just some of the innovative ways the industry is conserving, making it safer and regulating water usage.


Of utmost concern are natural gas emissions from production. This is driven by its, high Global Warming Potential, and its corresponding impact on local air quality and climate change.

This chart shows the Greenhouse gas inventory by type of gas.

We see that atmospheric CH4, also better known as, Natural Gas or Methane accounts for only 10% of all emissions. On the other hand, CO2 is by far the predominate greenhouse gas, at about 83%

However, not all atmospheric methane comes from natural gas production. In this chart, the slice labeled “CH4 Systems,” includes the entire natural gas supply chain, both conventional and unconventional.

Here we see that only a third of the emissions come from wells, pipelines and storage tanks. Other major sources of methane come from fermentation, landfill and coal mines.

Therefore, shale gas, itself, being a partial component of CH4 systems, constitutes about 3% of the total greenhouse gas inventory. By far, a minor contributor to climate change!

Furthermore, many producers and suppliers have already deployed relatively inexpensive methane detection and capture technologies and are able to realize profits from the use of these techniques.


Another major concern is human induced seismicity. Two shale gas processes may trigger such events:

First  – hydraulic fracturing, which cause micro-seismic activity about magnitude  -2, a slip of one tenth of mm, generating less energy than a gallon of milk falling off a kitchen counter

These events are minuscule and not felt but measurable. They pose no public health or safety risks and  occur on a continuous basis around the earth.

and # two. Wastewater injection wells, which are more active, between 1 and 4 on the Richter Scale.

These earthquakes are typically felt but rarely cause damage. The estimated frequency of earthquakes of this magnitude is about 1.3 million a year around the world

It’s important to note, under the right conditions, every time pressure is applied or reduced from an underground rock formation there is at least a small risk of a seismic activity.

This is also true in the case of mining operations, driving piles for bridge, building construction, and drilling geothermal wells, in seismically active areas.

Nevertheless, the industry continues to investigate ways to reduce the risk of sesmicity, such as: • Assessing susceptibility when identifying or permitting injection sites, • Requiring seismic monitoring at active well sites, • limiting well pressure thresholds by decreasing the amount of water pumped into wells and reducing the pressure at which it is pumped. • Another important option is to recycle and re-use wastewater

#16 –  The Answer

To find the right answer you first have to know the real problem. One thing we all can agree on, doing it wrong will lead to problems.

A fair number of investigations into the complaints concluded that the problems were avoidable and as I mentioned earlier traced to:  Inferior casing and cementing  Insufficient separation between gas-bearing rock and water supplies  And lack of oversight and adherence to best management practices

Other reported problems were subsequently found to be erroneous, lacking merit, or not representative of the industry.

 MIT reported there were only 42 complaints of contamination out of 15,000 shale wells drilled in the US – a 3 tenths of 1% problem.

 Also, Cornell University’s initial report stating that shale gas has a higher GHG footprint then coal was subsequently retracted. A new report concluded that its footprint is in actuality 1/3rd to ½ that of coal,

 and finally some law suits involving methane contaminated water were subsequently dismissed for lack of evidence. It was found that many water wells already contained methane gas before drilling started.

The answers lay in the fact that modern shale gas development is technologically driven and must be treated as such. Unproven cost cutting measures and process deviations are unacceptable.  60 plus years of experience tells us, shale gas can be safely managed and controlled. Done right it is a low risk proposition.

So our quest for answers has brought us to two simple words – Be Smart.

Be smart and ensure:

• Adequate oversight

• Adoption of appropriate regulations and legislation

• Onsite safety and emergency response plans

• Programs to train and certify the workforce

• Adherence to best management practices

• and Use of qualified operators


Like it or not, renewable energy has a long way to go to make an impact on any one country’s energy inventory. Natural gas, being the least disruptive fossil fuel, could serve as a ‘bridge’ to a low-carbon future.

Under a scenario, that envisions a worldwide momentum towards stick policies aimed at cutting greenhouse gas emissions; electric utilities and other sectors of the economy will have no other choice but to adopt natural gas as a logical alternative.

Natural gas will buy time to further develop, cleaner fuels. Hopefully there will be something at the other end of the rainbow, whether its 25 years or the end of the century.


In summary, the shale gas industry creates jobs, economic value, and government revenues. Additionally, it also provides broader macro-economic impact for both households and businesses.

This is especially true in industries, that are intensive users, of natural gas as a feedstock, such as the chemical industry, and industries that significantly benefit from lower cost electricity.

And along the way, society, unknowingly, becomes an environmental steward striving to sustain our environment.

In closing, I hope I achieved my objective and showed that shale gas development is safe, manageable and beneficial, now and for the future.

It’s your choice which path you will take. Fear and fear itself is not the answer. There is nothing magical about moving forward.

The road is there, the tools are in your hands. Time to put the crossroads behind you!


In closing, I look forward to the rest of the conference, and want to thank you again for having me here today.

Barry Stevens, PhD; President, TBD America, Inc.

Arlington, Texas

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