South Africa Commits to Shale Gas
South Africa’s mineral resources minister said the government remains committed to shale gas exploration despite a court order revoking fracking regulations that pushes back plans to award the first exploration licenses by 2019.
Farmers lobby AgriSA had said earlier that the High Court had issued an order quashing regulations governing proposed shale gas fracking in the Eastern Cape, one of the main areas where proposed shale gas exploration could take place.
The ruling to quash the regulations marked the latest setback to South Africa’s shale gas ambitions after a scientific study published last month suggested its Karoo Basin probably has a fraction of estimated deposits, deflating expectations of an energy bonanza.
However, Mineral Resources Minister Mosebenzi Zwane told Reuters the government could appeal the ruling and it was also considering a period of two years before any drilling started, taking into account various environmental and safety concerns.
“We remain committed (to shale gas exploration). We will study the outcome of the court and decide where we go,” he said.
“We are talking about first fracking licenses being granted in 2019 if everything goes well.”
Africa’s most industrialized economy has been hoping to find sufficient shale gas resources to exploit on a commercial basis.
South Africa’s government said in May it might award its first shale gas exploration licenses by the end of September, after environmental objections delayed the process.
“The judgment in our favor shows what can be accomplished when a community rallies around something as potentially devastating as fracking,” Janse Rabie, AgriSA’s natural resources chief, told Reuters.
Royal Dutch Shell, Falcon Oil and Gas and Bundu Gas & Oil are among five companies whose applications were being reviewed by the regulator.
Criticized by environmentalists worried about its ecological impact, fracking involves using water and chemicals at high pressure to crack rock and release the gas.
Campaigners say fracking could threaten the environment of the semi-arid Karoo, famed for its rugged scenery and rare wildlife.
The application to review and quash South Africa’s shale gas regulations, which has been in place since June 2015, was brought by the president of Agri Eastern Cape, together with 15 other applicants, including the agricultural unions of rural towns Graaff-Reinet and Cradock.
The court found the minister does not have the authority in terms of the law to make regulations concerning environmental issues, said oil and gas lawyer Lizel Oberholzer.
“So if the appeal does not succeed the regulations will have to be redrafted and this could cause additional delays,” she said
China Refineries Run at Record Sept Pace
China’s oil refineries increased their run rates by 12.7 percent to a record for September, data showed, after a major new state-run refinery launched operations and independent plants came back on stream after maintenance.
Processing volumes in September were up 12.7 percent in September compared with the same month a year ago at 49.34 million tonnes, or 12 million barrels per day (bpd). That was also an increase on August’s 11.1 million bpd, according to data from the National Bureau of Statistics.
For the first three quarters of the year, refinery output rose 4.7 percent from the same period last year to 418.4 million tonnes.
China National Offshore Oil Co’s 200,000-bpd Huizhou plant, in southern Guangdong province, started test runs in late September, becoming the second new major refinery brought on stream this year.
PetroChina started trial production at its 260,000 bpd Yunnan plant, near the southwestern city of Kunming, at end of June.
Meanwhile domestic crude oil production fell 2.9 percent on year to 15.53 million tonnes, or 3.78 million bpd.
Natural gas production rose 10.7 percent in September over the same month a year ago to 11.2 billion cubic meters.
Indonesia to Extend Inpex LNG Deal
Indonesia has agreed with Japan’s Inpex to extend the company’s contract to operate the Masela natural gas field in the country’s east by up to 27 years once it expires in 2028, the energy ministry said in a statement.
“This decision ... will give a 20-year extension to Inpex because their contract is almost over, with an additional seven years as compensation for changing the refinery development scheme from floating to land-based,” Energy and Mineral Resources Minister Ignasius Jonan said in the statement.
An Inpex spokesman in Jakarta confirmed Jonan met Inpex CEO Toshiaki Kitamura in Japan, and said the company was aware of media reports on the decision to extend the Masela contract.
“We continue to be engaged in discussions with the Indonesian government regarding the extension of the Masela PSC,” Inpex media relations specialist Moch N. Kurniawan told Reuters, declining to provide further details.
Indonesian President Joko Widodo in March 2016 rejected a $15 billion plan by Inpex and its partner Royal Dutch Shell to develop what would have been the world’s largest floating LNG facility to process gas from Masela, saying an onshore plant would benefit the local economy more.
The move was a blow to both companies and pushed the anticipated start of production from the field to the late 2020s, as development plans had to be revised.
Inpex subsequently asked to increase output from the LNG plant to 9.5 million tonnes per year, but the government has pushed the company to set aside a larger portion of the gas via a pipeline to domestic buyers.
The Masela block, located in the Timor Sea near Indonesia’s border with northern Australia, is 65 percent owned by Inpex and 35 percent by Shell.
Inpex is also working with BP, Mitsubishi, China National Offshore Oil Co, Sumitomo and Sojitz on an $8 billion expansion of the Tangguh project in West Papua province that will boost annual LNG production capacity there by 50 percent.
Indonesia’s gas demand has been in decline in recent years, and questions remain around how quickly Southeast Asia’s largest economy can develop infrastructure to absorb gas from these projects.
OPEC Seeking Consensus on Deal Extension
Oil producers are working to build consensus on extending their deal to reduce supplies, OPEC’s secretary general said, with the potential for continuation throughout 2018 forming a basis for talks.
The Organization of the Petroleum Exporting Countries, plus Russia and nine other producers are cutting oil output by about 1.8 mb/d until March 2018 in an attempt to eradicate a supply glut that has weighed on prices.
The deal has supported prices, which are trading within sight of a two-year high, but an overhang of stored oil has yet to be fully eradicated and producers are considering extending the deal at their next meeting on Nov. 30.
OPEC Secretary General Mohammad Barkindo, in a briefing with reporters, said that Russian President Vladimir Putin’s suggestion this month that the deal could be extended to the end of 2018 is being taken “seriously”.
Saudi Energy Minister Khalid al-Falih, the OPEC president, and Russian Energy Minister Alexander Novak “are taking cue from the open statement of President Putin and engaging the rest of the participating countries to build consensus before Nov. 30”, Barkindo said.
Barkindo said it wasn’t yet clear if the decision would be made on Nov.30 and, asked whether another meeting could be held in early 2018, said that Falih and Novak would consult and decide. “It is difficult to say at the moment what will be decided in November,” Barkindo said.
“It will depend on a number of factors, chief among which is how far we are from achieving our objective of a convergence of supply and demand.”
Falih and Novak are also talking to producers not currently participating in the supply cut, Barkindo added.