It has been a challenging few months for oil producers, with the falling cost of this valuable commodity putting a strain on operating costs.
Despite the obvious economic implications of the present environment, Shell South Africa continues to make headlines and attract plenty of interest. In late January, it was reported that South Africa’s ruling party, the African National Congress, was making plans to increase its stake in Shell South Africa
According to reports, Thebe Investment Corporation recently increased its shareholding in Shell SA to 28 per cent, indicating that it is still committed to its partnership with Shell.
A statement by AfriForum stated that, through Thebe, the Batho Batho Trust – an ANC investment vehicle – effectively has a 12 per cent stake in Shell SA Refining as of 2012, and a 14 per cent stake in Shell SA Marketing.
Shell SA has of course been a prominent employer in South Africa for well over 100 years. According to the corporate website, the company employs over 1,500 people in the country and has diversified its products and services over the years.
“Shell has been active in South Africa since 1902. Our main business activities in South Africa include Retail and Commercial Fuels, Lubricants and Oils, Chemicals, Manufacturing and Upstream Exploration. Our head offices in South Africa are based in Johannesburg,” states the company website.
“Our core values of honesty, integrity and respect for people form the basis of the Shell General Business Principles. Shell South Africa’s main focus at the time was on paraffin and kerosene, which brought both light and heat to communities across Southern Africa.
“Throughout its long association with South Africa, Shell has played an important role in the country, not only as a premier oil company, but also as a committed corporate citizen and change agent.
“Today, Shell South Africa is mainly involved in the Retail and Commercial Fuels, Lubricants and Oils, Chemicals, Manufacturing and Upstream Exploration.
“We have a nationwide Retail network of strategically located service stations, offering our customers a variety of fuels products, as well as friendly service and convenience shopping,” the site describes.
“Our Commercial Fuels and Lubricants division sells diesel, lubricants, illuminating paraffin, bitumen and heavy furnace fuels directly to end users in the transport, construction, manufacturing, mining, marine, agriculture and general consumer markets.
“In the Manufacturing area, the Sapref refinery, jointly owned by Shell and BP, is one of the largest refineries in Africa,” the site continues.
With South Africa’s energy needs a daily debate, sourcing new forms of natural energy remains a top priority for the country and Shell has applied for rights to explore for natural gas in the Karoo, stating that if enough natural gas is found, it could provide South Africa with a stable, cleaner-burning energy supply for power generation and economic activity for decades.
However, it is the method of extraction that has attracted plenty of debate and controversy, with the term “fracking” entering the public conscience.
Producing natural gas trapped in densely packed rock deep beneath the earth’s surface requires a technology known as hydraulic fracturing. This involves the injection of water at very high pressure into the rock formation to create tiny fractures that allow the gas to flow.
Within South Africa, those reserve of natural gas are located in the Karoo region, as Shell outlines.
In 2009, the Petroleum Agency South Africa (PASA) awarded Shell a Technical Cooperation Permit (TCP) for a one-year study to determine the Karoo’s natural gas potential. This study provided a better understanding of the region’s geology and shale gas potential, establishing a baseline to move forward with the process of pursuing natural gas exploration.
In December 2010, Shell submitted 3 separate exploration licence applications for areas of around 30,000 square kilometres each. These areas are in the Western Cape, Eastern Cape and Northern Cape provinces of South Africa.
As part of the licence application process, PASA required Shell to prepare an environmental management plan (EMP).
“PASA will review Shell’s environmental management plan as part of the process to decide whether to grant exploration licences. If these licences are granted, Shell will continue to engage closely with local communities, conduct exhaustive environmental studies and apply for regulatory permits to allow us to move forward with operational activities in the Karoo,” the company states on its website.
The site goes on to explain how fracking is a necessity in order to extract shale gas in the Karoo region:
“Advanced technology has led to a rapid rise in the production of vast resources of natural gas trapped in densely packed rock. In the Karoo, the natural gas is held in shale rock and is known as shale gas.
“The widely-used technique of hydraulic fracturing involves the injection of water, sand and other fluids at very high pressure into the rock formation, creating tiny fissures that allow the natural gas to flow.
“Hydraulic fracturing has been used safely on 1.1 million wells in the USA alone over more than 60 years. But in recent years, engineers have been able to drill wells horizontally from one site on the surface, reducing the environmental impact of producing this type of natural gas. This has helped lead to a dramatic rise in natural gas production, especially in the USA where it has transformed the energy supply picture.
“The fluids injected into the rock consist of more than 99 per cent water and sand, with a small amount of additives similar to those found in household products.
“The US Environmental Protection Agency and other independent environmental experts, including the Ground Water Protection Council, describe fracturing as a safe and proven technique.
“Decades of industry experience have led to the development of effective techniques for protecting groundwater supplies. For example, we prevent fracturing fluid from coming into contact with groundwater by lining wells with multiple steel and concrete barriers. The shale gas we produce typically lies over 1,000 metres below underground fresh-water aquifers.”
The dynamics of Shell South Africa have changed over the past century, but its commitment to South Africa remains as energized as ever.