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11/10/2013 (On-The-Air)

11th October 2013

By: Martin Creamer

Creamer Media Editor

  

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Every Friday morning, SAfm’s AMLive’s radio anchor Dhashen Moodley speaks to Martin Creamer, publishing editor of Engineering News and Mining Weekly.  Reported here is this Friday’s At the Coalface transcript:

Moodley: The Cabinet this week gave firm approval for the production of shale gas in the Karoo, in fact saying that there is a free stake for the government in this as well.

Creamer: The government is really working firmly on exploiting the shale gas possibility and six departments already have benchmarked this against world best practice. We know that shale gas exploitation takes place in developed countries, not just developing countries, so they have learnt lessons. We have now taken on those lessons and we will be gazetting a set of technical regulations from next week. People will have 30 days to comment on these. We will see there that fracture fluids, which have been an issue, will have to be fully disclosed and we will see steps to protect fresh water and we will even see steps to protect palaeontology. So they are going all the way with this and they want a win-win situation. For government not to do this will be a dereliction of duty, because of the possibilities. We saw, even in the United States, when they brought in that shale gas, it changed the economic structure of their country. They are even luring our Sasol in there with a billion dollar incentive to come in and do tricks on their shale gas. So, yes the government wants a 20% free carry in this, because we are going into a new era and we know that in oil and gas this is not uncommon. Other countries do it. There is a bit of an issue about 20% perhaps, but if it goes beyond 20% they will say what is the market value of this share, they will pay full value, but it will give them the right to go to 50%

Moodley: What I though was interesting was the outgoing Royal Dutch Shell Group CEO saying he actually regrets getting into this market in the US.

Creamer: This is the risk of business. You have got to go into a foreign country, you might have come in late and we see some of our own South Africans came in very late with the licensing in our Karoo on the shale gas issue. Some of them ended up on the periphery. You can do that.

Moodley: This week saw another important step towards the production of valuable natural gas off the seabed of Cape Town.

Creamer: Yes, 380 km north of Cape Town is our biggest and probably most advanced gasfield, Ibubisi. The Australians have come in and taken a share of that and this week, they got the transfer of ownership in form of a licence. The ASX-listed Sunbird owns 76% of this and there is already State involvement there, because we see our PetroSA has got the remaining 24%. They are looking to turn this to account, because there is a proven section there and there is also exploration potential. They are looking to two links to shore from there in the next few years. One to power, they hope, Eskom’s Ankerlig power station that is using expensive diesel. They can come in at half the price with gas, and also linking up to Saldanha, where we have just seen the State President declare it an industrial zone. There will be some independent power producers there. The Americans are even helping the Australians with this. They have given them bucks because Obama has this climate action plan and gas is seen as mitigating against some of the impacts on the environment. So, they are getting $1-million from the Americans even.

Moodley:  A bit of a different scene here exploration a bit more difficulty, they are saying dangerous waters and an expensive operation isn’t it?

Creamer: Well, it’s always expensive that is why when it comes to exploration, then you must roll out the red carpet. Exploration is high-risk, but when it comes to production, it is another story. That is where the government is wanting some free carry. So, this is going to upset some of the people who have said South African waters are treacherous and we have come in here at high risk so why not 10%? The beauty of it is that this is still before Parliament and it is enshrined in the legislation that is being amended.

Moodley: A survey is under way to determine the true nature of the skills gaps in the way of South Africa’s huge National Infrastructure Plan.

Creamer: This is actually engineering skills. It is like having a census on engineers, calling all engineers, technicians and technologists to just get onto the internet and do this ten-minute survey at www.engsurvey.co.za and we need to know exactly what sort of engineering you are involved with. We don’t only want the size, we want the composition of your skills, because we have got this massive infrastructure plan and we need to match those skills and we want to know where the gaps are. Already they picked up that there is a pretty big gap in land surveying. They will then inform universities after the survey ends in March and they will inform Home Affairs so that they can also be aware of the scarce skills.

Moodley:  25% unemployment we definitely need to address that. BMW I’m sure would want some of those skills at its plant. I got this sms this morning from a listener saying that he has asked this question a couple times, which country has the most gold resources physically? He asks that in the context of can we regain our number one position?

Creamer: South Africa can definitely regain its number one position. We have 40% of the known world reserves of gold and they are under there, we just have to get them out, but it’s deep, dark and dangerous down there, that is why they are looking for new technology.

Moodley:  And that is why the CEOs of these companies have been replaced. Chartered accountants being replaced by mining engineers, so mine what is there better not looking offshore. Maybe the threats of these companies looking elsewhere are veiled threats at best. Even BMW we have been saying is a veiled threat to go and look for alternatives overseas. Thanks very much. Martin Creamer is publishing editor of Engineering News and Mining Weekly, he’ll be back with us at the same time next week.

 

Edited by Creamer Media Reporter

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