New York Times
POSTED: 1:30 a.m. HST, Dec 31, 2011
KAROO, South Africa » When a drought dried up their wells last year, hundreds of farmers and their families flocked to local fairgrounds here to pray for rain, and a call went out on the regional radio station imploring South Africans to donate bottled water.
Covering much of the roughly 800 miles between Johannesburg and Cape Town, this arid expanse -- its name means "thirsty land" -- sees less rain in some parts than the Mojave Desert.
Even so, Shell and several other large energy companies hope to drill thousands of natural gas wells in the region, using a new drilling technology that can require 1 million gallons of water or more for each well. Companies will also have to find a way to dispose of all the toxic wastewater or sludge that each well produces, since the closest landfill or industrial-waste facility that can handle the waste is hundreds of miles away.
"Around here, the rain comes on legs," said Chris Hayward, 51, a brawny, dust-covered farmer in Beaufort West, quoting a Karoo saying about how rare and fleeting precipitation is in the area.
With his three skinny border collies crouching dutifully at his side, Hayward explained that he had to slaughter more than 600 of his 2,000 sheep last year because there was not enough water to go around.
"If our government lets these companies touch even a drop of our water," he said, "we're ruined."
South Africa is among the growing number of countries that want to unlock previously inaccessible natural gas reserves trapped in shale deep underground. The drilling technology -- hydraulic fracturing, or "fracking," for short -- holds the promise of generating new revenue through taxes on the gas, creating thousands of jobs for one of the country's poorest regions, and fueling power plants to provide electricity to roughly 10 million South Africans who live without it.
But many of the sites here and on other continents that are being considered for drilling by oil and gas companies and by governments short of cash are in fragile areas where local officials have limited resources, political leverage or experience to ensure that the drilling is done safely.
The interest from big energy companies in South Africa and elsewhere means that shale gas may redraw the global energy map, according to many energy experts.
Michael Klare, a professor of world security studies at Hampshire College, said that the new sources of natural gas from shale may lessen the geopolitical importance of countries that historically have been the biggest producers of natural gas, including Iran, Qatar and Russia. The new drilling, which draws strong support from the United States government, represents a boon for U.S. companies like Halliburton, Chesapeake Energy and ExxonMobil that have greater experience with shale gas, and therefore are likely to win many lucrative contracts abroad.
More than 30 countries, including China, India and Pakistan, are now considering fracking for natural gas or oil, and the surge in gas production has spurred interest in building pipelines and terminals that liquefy the fuel so it can be shipped to far-flung markets. In the U.S., shale gas has increased supply, driving prices down and benefiting industrial plants that use the gas for manufacturing and consumers who depend on it for electricity, heating or cooking.
But the enthusiasm abroad, especially in less-developed regions, does carry risks, according to many energy experts.
"The big problem is that all the excitement around shale gas, most of it fostered by the U.S., has also led some countries, especially in the developing world, to take a drill-first, figure-out-regulations-later attitude," said Klare, who has written extensively about the way that energy policies affect global security. "There is simply too much being taken on faith when it comes to company reassurances about the safety and costs of this drilling."
The Indonesian government, for example, is considering allowing drilling for shale gas in a part of Java where, in 2006, drilling led to the eruption of a mud volcano that killed at least 13 people, and displaced more than 30,000 residents from 12 villages, according to a team of international scientists. Indonesia is a major exporter of liquefied natural gas, but it struggles to meet domestic demand, and supporters of the shale drilling project say it will help solve that problem.
Shale gas in Poland may represent more than a third of the natural gas resources in Europe, according to energy experts, and could help the country reduce its dependence on Russia, which now supplies about 60 percent of Poland's gas.
But an April 2010 report by Bernstein Research, a market research group, raised concerns about the costs and risks of shale gas drilling because Poland is so densely populated and dependent on agriculture. Farmers will have to compete with drillers for water.
"Europe and some of the countries with shale potential have significantly less renewable water resources than the U.S.," the report warned.
In the United States, where the water-intensive drilling technique of fracking was invented, the government is taking a lead role in supporting the dissemination of the technology abroad, as well as promoting other energy projects, including building infrastructure to extract and transport liquid natural gas.
Over the past three years, President Barack Obama has promoted shale gas during visits to China, India and Poland.
"We believe that there is the capacity technologically to extract that gas in a way that is entirely safe," Obama said in a speech in May in Warsaw, where the U.S. Embassy co-hosted an international shale gas conference.
The Export-Import Bank of the U.S. has financed some of its biggest gas projects over the last several years, including the largest transaction in the bank's history -- $3 billion approved in 2009 for hundreds of miles of gas pipeline and a liquid natural gas plant and terminal project led by ExxonMobil in Papua New Guinea.
The U.S. Geological Survey has offered training and technology to geologists exploring shale gas in Europe.
In 2009, the U.S. and China signed an agreement to promote accelerated development of shale gas in China, which has major shale gas deposits in Inner Mongolia in the north and in the country's restive western frontier, Xinjiang, which is characterized by severe droughts and a separatist movement.
The State Department's Global Shale Gas Initiative, begun in 2010, has been advising many foreign countries on fracking. It has organized a half-dozen trips this year for foreign officials to meet with U.S. energy experts and to visit drilling sites in the U.S.
The website for the initiative says that its primary goals are "to achieve greater energy security, meet environmental objectives and further U.S. economic and commercial interests."
Some economists and environmentalists say that while the governments of poorer countries may benefit from the new tax revenues and jobs, they may not be paying enough attention to the environmental risks of drilling. They also note that local residents -- who bear the brunt of the air pollution, potential water contamination from spills or underground seepage, and truck traffic that come with drilling -- may see few benefits.
"These projects have already started causing steep inflation in costs of local housing and services, and except for the lucky few who get temporary construction jobs, the economic conditions for local communities can actually get worse," said Doug Norlen, policy director of Pacific Environment, an advocacy and research organization that tracks federal and corporate financing of energy projects abroad.
The direct benefits of new drilling to U.S. landowners -- they receive bonuses and royalties when they lease their land to drillers -- will generally not be shared by landowners abroad. In South Africa and many other countries looking to embrace the new drilling, the minerals under a property are more often owned by governments, not individuals.
Norlen added that the influx of foreign construction workers in these projects could lead to conflicts with local and tribal communities. In one example, he noted, the U.S. government-financed project in Papua New Guinea to extract and transport liquid natural gas recently led to violent clashes between residents and foreign contractors.
But Jan Willem Eggink, general manager for Shell in South Africa, said that the Karoo project could eventually produce millions of dollars in direct investment and thousands of jobs for South Africans, which would help lower the nation's unemployment rate of about 25 percent.
"There is a huge energy problem looming for South Africa," he added, explaining that energy demand is growing rapidly and that shale gas coupled with renewable energy resources could help meet that new demand while also lowering the nation's dependence on Mozambique for gas.
Fracking involves injecting large amounts of water mixed with chemicals and sand at very high pressure deep underground to crack rock and release gas. After fracking, much of the water at each well returns to the surface mixed with toxic chemicals.
Shell's plan is to drill at least six exploratory wells over the next three years, and if the gas reserves appear profitable, it will start production with at least 1,500 wells several years later. Martin Bell, the water manager for Shell's Karoo project, said the company planned to recycle as much wastewater as possible, storing it temporarily in closed containers. Trucks will not be the primary method for moving waste or water, he said. Drilling waste, which could be especially toxic because the area is high in uranium deposits, will be shipped to disposal plants by pipes or by rail, Bell said.
Water needed for fracking may be brought in by rail from the coast, which is hundreds of miles away in some parts, or drawn from aquifers far below the ones that supply water for farmers. The company will tap into the aquifers that farmers use only if it can prove no adverse impact, Bell said.
In interviews, South African drilling regulators emphasized that producing and using more natural gas would help the country's air pollution problems and avoid increasing its already heavy dependence on coal for electricity, since coal is dirtier than natural gas when burned.
But in this sun-flooded hinterland, where sheep outnumber humans and rusty windmills pumping water dot the horizon, many residents say they would prefer to see the government bring in large wind or solar farms, not new drilling.
"It just takes one big spill, leaky pipe or crack underground that their studies didn't catch, and a farm my family has run for four generations is done," said Trenly Spence, 44, as he dug up a clogged irrigation pipe that carries water across his 3,300 acres to where his 3,000 sheep and goats graze.
Spence added that farmers had been frustrated by the lack of information from Shell officials about the chemicals they would inject into the ground during fracking.
Shell officials said that they would disclose what they could about fracking formulas if they started drilling, but that they might be limited by trade secrets of their subcontractors.
In the U.S., some drilling companies have been reluctant to reveal the chemicals they use in fracking, saying the information is proprietary.
Officials from the State Department's shale gas initiative have said that developing countries interested in fracking will need to create stronger protections for intellectual property rights so energy companies will think that they can safely maintain certain patents over their drilling techniques. Some environmentalists say that strengthening these intellectual property protections will only help energy companies argue that they do not have to disclose the chemicals they use in fracking abroad.
A spokesman for the State Department declined to answer questions about fracking and intellectual property rights. But he emphasized that the initiative's goal is to help countries make informed decisions about their resources, rather than promoting shale gas abroad.
"The regulatory and financial climate is obviously important to companies considering an investment in unconventional gas," the spokesman said in an email. "But sound environmental regulations and policies are also critical, as is working with local communities and other stakeholders to understand the impact of shale gas on their lives."
Some legal experts say that the U.S. needs to be more concerned about environmental and other impacts as it promotes energy technology abroad.
David Hunter, director of the Program on International and Comparative Environmental Law at American University, said, "Especially with energy projects, the U.S. and its funding institutions have a habit of promoting policies that foster a stable climate for foreign investors but that are not in the best interests of local populations."
In Peru, for example, the U.S. Export-Import bank provided more than $400 million in loan guarantees in 2008 for a liquefied natural gas terminal to export gas from the Camisea gas fields, which are in the Amazon rainforest. The project for drilling and pipelines in the Camisea, which received separate financing from the Inter-American Development Bank, has been dogged by spills, accusations that company officials bribed lawmakers and criticisms about exporting the gas rather than using more of it to lower prices for domestic consumers.
Energy companies are using fracking technology in parts of Canada, bringing jobs and wealth to gas rich provinces such Alberta and British Columbia. But residents near drilling sites have complained that natural gas has seeped into their water wells making their tap water flammable. Drillers have denied responsibility.
In South Africa, pressure is mounting to proceed cautiously.
After public concerns were raised this year about drilling in the Karoo region, South African drilling officials set a moratorium on new licenses for exploration until February so the government could conduct more research.
In July, the Advertising Standards Authority of South Africa, an independent agency that sets guidelines for media companies, ruled that several of Shell's advertised claims -- including one that said fracking had never led to groundwater contamination -- were misleading or unsubstantiated and should be withdrawn. Shell said the advertisements were an accurate reflection of its opinion.
"The government is under a great deal of pressure to hurry up," said Hein Rust, director of disaster management for the central Karoo region. "But I don't think these decisions should be made on faith or until all the costs are known."