MARKETS

Challenger hopeful of SA movement

SOUTH Africa needs to deal with its energy crisis in 2016 by allowing shale gas exploration to fi...

Haydn Black

In a letter to shareholders Fry admitted that it may seem that Challenger has been in a holding pattern, awaiting the outcome of government process in South Africa, but the environment in sub-Saharan Africa has actually seen a lot of not-so-obvious progress.

He said the company was “deeply engaged” with the government in developing a framework to allow shale gas developments.

There is even more pressure mounting on the South African government to allow the development of new gas resources to help overcome the nation’s intractable energy woes.

“We now feel that the stage is set for progress on the shale gas front in a far more compelling way than at any time prior to this point,” Fry said.

He said the government’s Operation Phakisa initiative, aimed at kick-starting key sectors of the economy, has helped convince the government to resume the processing of the exploration right applications that had been on hold since 2011.

Challenger updated its environmental plans for its Karoo Basin areas, and believes the Petroleum Agency South Africa will soon recommend its exploration right be approved.

That should be followed by the revision to the law or suspension of controversial clauses will be suspended, pending the splitting of the legislation into separate acts covering mining and oil and gas.

“Either way, it seems this may now be off the critical path and the government can proceed,” Fry said.

Further, a two-year strategic environmental assessment for shale gas development signals that government is now thinking ahead in terms of high-level policy-setting and decision-making on the basis that the exploration process will result in a commercial resource.

The government is preparing to release a request for proposals for more than three gigawatts of gas-fired power generation to help overcome the crippling energy shortages facing the economy.

“It is a matter of national interest, we believe, that exploration gets under way soon, so that informed decisions can be made about the extent to which shale gas can influence South Africa’s energy mix, and thus economic recovery,” Fry said

Challenger isn’t the only Australian keen to play a role.

Sunbird Energy has spent several years trying to develop the 540 billion cubic feet Ibhubesi gas field in the offshore Orange Basin, and Kinetiko Energy expects to start a long-term production test of its Amersfoort CSG project next year.

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