A bearish oil market and permitting delays have forced the oil company Royal Dutch Shell to shelve its ambitions to tap shale reserves in South Africa. Reuters reports:
A more than halving of crude oil prices since June has put high cost projects such as shale gas exploration in jeopardy around the globe, and Shell South Africa said waiting six years for a licence for Karoo had not helped. […]Shell’s retreat is a blow to the South African government, which has been criticised by oil firms for delaying issuing exploration licenses, most notably in the Karoo region, which is believed to hold up to 390 trillion cubic feet of technically recoverable reserves. […]The government has been accused of dragging its heels in finalising policy for gas and oil exploration. Pretoria has also said it wanted a 20 percent free stake in exploration ventures, before companies have covered their costs.
The fall in the price of oil is just the latest in a long list of problems for countries trying to replicate the American shale experience. South Africa is estimated to have the world’s eighth largest reserves of shale gas, but is struggling to provide a transparent and consistent regulatory environment as it works to devise its shale policy. Meanwhile, operators like Shell are understandably getting frustrated by the resulting licensing delays.But with crude trading at less than half of what it was last June, majors are cutting capital expenditures across the board. That makes new and expensive projects like the exploration of shale formations in countries not experienced in the drilling industry much less appealing.Yet again we’re reminded of just how unique the U.S. energy renaissance really is. We had the right mix of regulations, know-how, services, pools of capital, market conditions, and of course geology to tap a transformative resource. Meanwhile, countries like China, Poland, Australia, and South Africa are all desperately trying to play catch-up, and they’re finding that it’s a lot harder than it may have looked.