by Garth Cilliers

Changing energy landscape

World set to change for ever in unexpected ways

The global energy landscape is changing

“The global energy landscape is changing so fast that governments and strategists are struggling to keep up” and “it’s not going to be business as usual over the next decade. It will change the world in ways we have not even considered,” writes Andrew Stone in an article on the think-tank website EY.

This looks like a sensational observation. However, when the facts are examined and considering that OPEC, which currently controls 35% of the world’s oil production, in May 2013 appointed a committee to investigate the impact of US shale or rock sediment oil and gas extraction on the future of global energy production, it merits closer inspection.

With the oil price stable at around $100 per barrel, shale oil can be produced at a competitive price, placing pressure on OPEC’s current production of 30 million barrels per day.

Hydraulic fracturing, commonly known as fracking, is a highly controversial technique and its critics object to the potential negative environmental impact including pollution and the huge amounts of water required.

While the debate rages on there can be little doubt that fracking is not only rapidly becoming one of the preferred techniques to release natural gas but is also challenging other energy generation sources, notably coal and nuclear.

The United States is the global leader in using fracking and during the last year shale gas and oil production in the US jumped 20% to 7.37 million barrels per day, representing more than a third of daily US consumption of 19 million barrels. It also contributes to the reduction in energy prices in the US.

It is predicted that shale gas and oil production in the US will increase by 40% between 2011 and 2014 and by 113% from 2011 to 2040.

The International Energy Agency (IEA) predicts the US will become the world’s biggest oil producer by 2020, overtaking Saudi Arabia, putting Washington in a position to cut its oil purchases from any OPEC member and becoming a major energy exporter itself.

Not only has fracking in the US contributed to a drop in energy prices, it has overturned the economic downturn in states like Pennsylvania, Texas and North Dakota where the fracking industry is pumping millions of dollars back into the local economies and also creating thousands of new jobs.

It is estimated that, nation-wide, the fracking industry in the US will create over 600 000 new jobs by the end of the decade. 


Global impact

The impact of natural gas and oil released by the fracking process is, however, not only felt in the US but will soon be felt on a global scale. Shale gas and oil resources are distributed across the globe and new discoveries are made regularly.

Of the 10 countries identified world-wide to hold the largest recoverable shale gas and oil deposits only one, Algeria, is an OPEC member which explains the growing concern among the cartel’s member states that their energy hegemony is under threat.

Among the remaining nine countries China is in first place with the biggest proven reserves followed by the US, Russia, South Africa (at number four), Argentina, Brazil, Canada, Mexico and Australia.

With Europe, the world’s largest gas market, set to enter the shale gas extraction phase soon, the potential future global strategic, geopolitical and economic shifts become staggering.

Imagine a world in the near future where China, the US and Europe are far less reliant on energy imports and even become self-sufficient; Russia, currently the world’s biggest gas producer, loses the European market; and the volatile oil producers of the Middle East and OPEC surrender much of their influence and significance.


Consequences for Africa

Fracking also holds far-reaching consequences for Africa. The two major oil producers in Africa, Nigeria and Angola, whose lighter grades of oil are very similar to the North American shale oil grades, are already experiencing significant reduction in oil exports to the US.

US oil imports from Angola have declined to the lowest level since 1993, while Nigeria’s exports to the US have dropped to a 19-year low. For both countries it is not going to be easy to find alternative buyers and both are looking to Asia.

The challenge is even more daunting for those African states harbouring grandiose plans to use their newly found energy fortunes to improve their status in Africa and further afield.

Ghana, Uganda, Mozambique and Tanzania will have to factor in, with the challenges they already face, the new truth that they will have to compete with established players in a market where supply could soon eclipse demand.

This is not good news for Africa’s new energy producers and it is perhaps necessary for them to take cognisance and temper their excitement and expectations.


South Africa 

The same lessons are true for South Africa where fracking in the semi-arid Karoo has become a highly emotive issue. It is a typical example of the often repeated conflict between conservation and development with much time, money and energy wasted in trying to outsmart the opposition instead of trying to find common ground.

The message is clear -- hydraulic fracturing and extracting gas and oil from shale has opened a new door in the search for more and cheaper energy and it is a door that will stay open.

For the sake of both conservation and development globally, but particularly for the pristine and naturally beautiful Karoo, it is imperative that as revenue is extracted from the shale deposits deep underground, it is equally shared to improve the economy and lives of the people and to safeguard the natural beauty of the Karoo. 

comments powered by Disqus


This edition

Issue 395


environmentza Get the latest edition of Minister of Environmental Affairs Dr Edna Molewa unpacks #jobs created, #envi… 4 days - reply - retweet - favorite

Leadership_Mag The first black woman to head a South African bank is neither grey nor boring 4 days - reply - retweet - favorite

Leadership_Mag Does Size Matter? Find out more about Brevity Law 4 days - reply - retweet - favorite