COMPANY PROFILE
2013
SHELL
SOUTH AFRICA
On the brink of an energy supply revolution
COMPANY REPORT
On the brink of an energy
supply revolution Editorial: Lauren Grey Production: David Hodgson It is estimated that before 2050 the global demand for energy will have doubled which, if ignored, could have a crippling effect on the world’s economy. Advancements in technology however are helping energy providers such as Shell SA to unlock new sources of energy, but at what price? IndustrySA finds out more…
As living standards and development in emerging economies continue to increase across the globe, so too does the demand for energy; it is evident therefore, that over the coming years the world must find more energy at a reduced cost to the environment, and global energy giant Shell claim to be doing just that. One of Shell’s most recent projects in a bid to solve the global energy crisis involves finding alternative ways to open up new resources of natural gas, the world’s cleanest-burning fossil fuel. Natural gas is an affordable and environmentally acceptable way to power lives now and in the future, and according to the International Energy Agency,
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the world has enough natural gas to meet current demand for 250 years. Natural gas emits 50-70% less carbon dioxide (CO2) than coal when burnt to generate electricity, and for most countries, using more natural gas for power generation can make the largest contribution to their emission reduction targets. During a luncheon sponsored by the Boston College Chief Executives’ Club in March, Peter Vorster, Shell CEO, addressed controversy surrounding natural gas, calling it a ‘backbone fuel’ that could help in the world’s transition from oil and coal, to an economy that relies heavily on cleaner energy resources.
SHELL SOUTH AFRICA
Critics say that natural gas is still a fossil fuel that produces greenhouse gases, and claim that by putting their blind faith into the cheap resource, energy companies are hindering the adoption of renewables like wind and solar. “Gas is the natural ally of renewables like wind and solar,” Vorster commented at the luncheon, “wind and solar are intermittent energy sources [but] natural gas can keep the electricity flowing when the sun doesn’t shine and the wind fails to blow. Unlike many other energy sources, gas can be switched off and on quickly, and its global supply is increasingly diverse, which enhances energy security.”
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COMPANY REPORT HYDRAULIC FRACTURING Amidst controversy surrounding natural gas and the new ways in which it is being sourced, Shell announced it will put its faith behind the cheap resource, pledging to produce more gas than oil; a target which was reached for the first time this year, but not without difficulty. With the help of advanced technology, Shell SA has recently invested in a technique known as hydraulic fracturing, or fracking, which is used to unlock natural gas trapped tightly in rock pores, as little as 100 times less the width of a human hair. Fracking is the process of injecting fluid into the ground at a high pressure in order to fracture shale rocks and release the natural gas trapped inside. First, the earth is drilled to several thousand feet, until a natural gas reservoir is reached. Steel casings are then inserted to a depth of 1000 to 3000 feet, and the space between the casing and drilled hole is filled with cement to stabilize the well and prevent leakage; once the cement has set, this process is repeated using a series of smaller casings until the gas reservoir is reached. The next step is to pump millions of gallons of fracking fluid into the well at a high pressure; the fluid is made up of water, mixed with sand and chemical additives, and formulas vary slightly among production sites in accordance with the unique requirements of each site’s geology. The mixture reaches the end of the well where the high pressure causes the nearby shale rock to crack, creating fissures where natural gas flows into the well. The gas is then processed, refined, and shipped to market.
SHALE GAS EXPLORATION IN THE KAROO In September 2012, after a momentary ban on fracking, the South African government decided that the technique was safe, and Shell SA began their exploration for natural gas deep beneath the earth’s surface at their site in the Karoo. Amidst controversy, Chairman of Shell SA, Bonang Mohale told Business Day Live that he welcomed the government’s decision, but says that ‘these things are never easy’, “we have an opportunity in South Africa to create a brand-new industry that will provide energy and economic benefits not just the people of the Karoo but also to 50 million South Africans.” According to America’s Energy Information
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Administration (EIA) South Africa could boast shalegas reserves of around 485 trillion cubic feet, and the 800 miles between Johannesburg and Cape Town, most of which belongs to the Karoo, is said to be the fifth-largest shale gas basin. Mohale told Business Day Live that the shale gas exploration not only contributes towards the global energy crisis but is due to create a minimum of 300,000 jobs, contributing to Minister of Economic Development, Ebrahim Patel’s vision to create five million jobs in South Africa by 2020. “Shell globally employs 100,000 people, so 300,000 just in one country would be realistic” says Mohale, “there are people who have to grade the roads, supply food for our people that are there, and work as janitors, plumbers and electricians. There are also the geologists and hydrologists, and they will buy cars and heavy equipment, thereby stimulating economic activity. Most of the jobs are not created in the exploration phase but in the development phase once the gas flows in sufficient quantities to be economically viable.” Mohale says that there will be a minimum of 24 wells in the Karoo, should the exploration be successful, “… we can start with six wells within the first three years, and if we do not hit a sweet spot we would do no more than 24. This is a marathon. Remember, we started this process in 2009 and because we know that it’s fundamentally right we will stop at nothing to make sure we improve the quality of the lives of the majority of the people, being 50 million South Africans.”
SHELL SOUTH AFRICA ENVIRONMENTAL CONCERNS Shale gas exploration in the Karoo has been met by stiff opposition from farmers and environmental groups who suggest a myriad of health concerns and environmental risks are associated with natural gas production. Jonathan Deal, coordinator of local action group, Treasure Karoo Action Group (TKAG) reportedly said that popular opposition was rising across the country, and challenged Shell SA to put its energy into exploiting South Africa’s unrivalled solar resources, before pushing the drilling of what he considers to be a ‘marginal resource’ in the Karoo. “It’s time that companies like Shell started investing their billions into sustainable energy,” Deal said in a radio interview. Those against fracking in the Karoo are particularly concerned about the impact on water resources, TKAG say on their website, “In South Africa, the fracking process can require around
20 million litres of fresh water to frack one well. According to Shell, there can be as many as 32 wells on one well pad. This would mean that about 640 million litres will be used to frack 32 wells (for only one well pad). Each well pad can be between one and two and a half hectares in size. “There can be four to six well pads in an area of 10 km2. The well pads can be spaced two to three kilometres apart. This would relate to up to almost four billion litres of water that can be used per 10 square kilometres. Especially in a semi-arid region like the Karoo, and given the water restricted nature of the country, this is alarming.” TKAG also say that during the fracking process, risks regarding chemical spills, loss of control over the well, gas leaks and surface and ground water contamination are not to be underestimated, “Fracking fluid is considered hazardous waste and contamination of drinking water can lead to the disruption of the endocrine system, as well as cancer.”
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Tender requirements Siyakha Consulting has been a proud Implementation Partner for the Oil & Gas sector in South Africa in the past 12 years through the provision of BEE services, human resource consulting and the management of development programmes. On behalf of the beneficiaries of these programmes we thank you, SHELL, for your support in being part of the African solution. For more on localisation, African development or defining your African strategy, please contact Angela Raine on
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APR 13 PAGE 5
COMPANY REPORT
SHELL SOUTH AFRICA
“We need water to drill, we need water to frack, there’s no denying that, and Shell is looking at suitable options from where to source that water”
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Confidence through expertise
YOUR BUSINESS IS FULL OF CHALLENGES AND OPPORTUNITIES. WE CAN HELP Intertek is a world leader in petrochemical and chemical bulk commodity cargo inspection, surveying, measurement, and testing at all stages of the production cycle and the supply chain. Some of the extensive solutions offered include: • Accurate, timely reporting of ship, shore, inventory quantities • Ship Care • Bunker Surveys • Atmospheric Monitoring • Product Sampling • Tank Cleanliness Inspection • Tank Wall Wash • Inspection of pipelines, terminals, shipto-ship transfers • Demurrage evaluations
• Discrepancy Investigation (auditing, investigation of cargo discrepancy or loss) • Draft and hold services • Product bench marking • Sample quality testing, retention and disposal • Additive Treatment Services • Training Services • Oil Condition Monitoring • Metering and Calibration • Environmental Testing
GLOBAL NETWORK Present in OVER 100 COUNTRIES
Durban: +27 (0) 31 274 8000 • Johannesburg: +27 (0) 11 552 8149 Cape Town: +27 (0) 21 418 3121 Email ops@intertek.com www.intertek.com
Intertek Shell South Africa is working hard on upstream activities with a large emphasis being placed on extraction of natural gas and optimisation of valuable oil fields. One company playing a major role in the Shell SA supply and value chain is Intertek, a global company and South Africa’s market leader in the petrochemical testing industry. Intertek Business Development Manager, Thomas Andrews recently told IndustrySA more about the company’s activities in Africa… Who is Intertek? What are your core activities? Intertek is the leading quality solutions provider to industries worldwide. From auditing and inspection, to testing, training, advisory, quality assurance and certification, Intertek adds value to customers’ products, processes and assets. With a network of more than 1000 laboratories and offices and over 35,000 people in more than 100 countries, Intertek supports companies’ success in a global marketplace. How is Intertek performing? Has 2013 started well? The group recently announced its results for the year ended 31 December 2012. Some of the highlights are as follows: • Revenue growth of 17% to £2,054m; constant currency organic revenue growth of 8.6% • Profit growth of 19% to £335m; constant currency organic profit growth of 11.2% Within South Africa we are identified as the market leaders within the petrochemical testing industry. Explain the services offered to petrochemical companies, especially from the OCM lab in Johannesburg? Our recently established OCM lab in Johannesburg is staffed by leading tribology experts and with our custom designed web portal and reporting system this service is destined to become a key service provider to the transport and mining industries of Sub Saharan Africa. Intertek is able to offer clients access to a global network of modern laboratories and state-of-the-art inspection services. Our facilities are web-enabled and staffed with highly skilled specialists. Our commitment to the highest level of quality standards and our quest for ongoing excellence through innovation has earned
us a reputation, the admiration of our competition and the trust of our customers. We are an ISO 9001:2000 certified company, with rigorous internal quality control standards and with comprehensive testing capabilities throughout Africa, with state of the art laboratories based in Durban, Cape Town, Johannesburg, Beira, Dar es Salaam, Mombasa, Luanda Abidjan, Takoradi, Limbe and Lagos. We are entrusted by our clients to assist them with custody transfer points and report on the integrity of the consignment and minimize risk. Intertek RSA specializes in chemical, petrochemical superintendence and testing, ensuring that the quality and quantity is known. Tell us about the lab locations around the African coast? Intertek has 20 oil, gas and chemical laboratory throughout Africa with presence in the following: Côte d’Ivoire, Cameroon, Congo, Ghana, Nigeria, Gabon, Guinea, Togo, Angola, Djibouti, Kenya, Tanzania, Mozambique and South Africa. What can we expect from Intertek in the future? Our goals for the next 12 – 24 months are to not only continue with our existing services but through improved quality systems to ensure that our customers enjoy improved services. Our global and regional footprint is to be further expanded with particular emphasis on laboratory services specifically customised to meet individual requirements. Our newly established Agri lab in Johannesburg will allow customers in this industry to enjoy the professional quality experience currently enjoyed by our petrochemical and petroleum clients.
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SHELL SOUTH AFRICA
COMPANY REPORT
ADDRESSING CONCERNS Amidst concerns, Mr Mohale, spoke to the Oxford Business Group saying that in his view ‘the case for natural gas is compelling’, “Some ten million South Africans have no access to electricity, representing about 20% of the country’s population…because of the huge gap in the energy supply, it [South Africa] will need to invest in all types of energy sources, ranging from coal, to gas, to nuclear and to renewables. “So in addition to contributing to closing the power generation gap, natural gas is affordable and environmentally acceptable. The country could also realise substantial job creation and other benefits should economically viable gas resources exist in the Karoo” he says. Acknowledging concerns at an earlier public consultation process in February 2011, Mr Mohale stressed that the Karoo project would be treated with honesty, committing to full transparency throughout the entire process. “We will be open, honest and transparent in
everything we do” he said, even promising a full disclosure on the types of chemical additives used in its fracking fluid. At the same consultation process, Shell general manager of new ventures execution, Graham Tiley, addressed public concerns regarding fresh water and where it would be sourced. “We need water to drill, we need water to frack, there’s no denying that” he admitted, “and Shell is looking at suitable options from where to source that water.” Tiley promised that out of ‘commitment and respect for the fragile water balance’ a thorough consultation on its water resource management plan would be executed, including recycling and treatment options. “We don’t need fresh water for fracking, we can use saline water, even sea water…or potentially import from other locations” he said, “our commitment will be to work with the local people, to understand the best option for each of the operations we conduct.”
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