As the United States (U.S) continues apace with production of shale gas, there is good news for Africa on the same front, according to a report released by the African Development Bank (AfDB) this week, which indicates that several African countries have potentially viable shale gas deposits.
According to the report, if developed, these deposits could lead to lower gas prices, increased consumption of natural gas, reduced greenhouse gas emissions from power generation and substantial economic benefits to producer countries.
It examined both the positive and cautionary lessons that Africa could learn from the "shale gas revolution" - the recent explosion of shale gas production in the US.
The authors also concluded, however, that the development and production of shale gas could present substantial problems for the environment. These include the large amounts of water required for extraction, water contamination, increased seismic activity and the venting and flaring of associated gas.
Governments and the public should therefore consider the most advantageous way to proceed before embarking on the full development of the resource, the report stressed.
"The African Development Bank is encouraged by the study’s findings in terms of the economic promise that new shale gas extraction techniques could hold for the region. At the same time, we cannot stress enough how important it is that production is accompanied by good environmental planning and management," said Kurt Lonsway, AfDB manager of environment and climate change in the Energy, Environment and Climate Change Department.
One analyst in London said that oil and gas exploration companies in Africa that were prepared to take on these challenges would do well, but they would have to have a proven track record.
"Given that the oil majors appear to be shying away from some countries in Africa for one reason or the other, it will be down to small oil companies to develop the continent's shale gas sector.
"Right now there are just a handful of such companies one can think of that fit the bill. I think that UK-based Heritage Oil could be up to the challenge. For a start, it operates in countries and regions that have been bypassed, going in at the ground level."
The oil and gas company is currently a major player in Nigeria through its OML 30 oil block within the Niger Delta, in one of the richest oil and gas regions in the world.
The AfDB reviewed estimates that had been made for shale gas deposits in Algeria, Libya, Tunisia, Morocco, Mauritania, South Africa and the Western Sahara and highlights the challenges to their development.
In a foreword to the report, AfDB President Donald Kaberuka, affirmed the Bank's willingness to support these and any other member countries and sub-regions that have shale gas prospects.
Indeed, the study's authors called for an "honest broker" role for the AfDB moving forward. They said the AfDB should work to ensure that governments with possible shale reserves were well informed and had access to reliable information on possible environmental consequences. This included understanding possible solutions to these challenges, as well as grasping the legislative and regulatory actions needed to minimise risk.
Heritage, as the London analyst explained, should be able to meet these requirements. Indeed, once reserves have been proven, the company's technical team appraises and confirms commercial viability, while the development teams provide information to enable the company to best achieve revenue generation and cash flow by moving the hydrocarbons into production.
Heritage says a strong regard for the environment and respect for local communities is important.
The AfDB said it could provide support to countries with shale gas reserves in the form of technical assistance loans and, in some cases, through the financing of infrastructure associated with shale gas development.
To better understand the shale gas revolution’s relevance for African countries, the study also looked at the experience in the US, where by 2012 production amounted to one-third of the country's total gas output and where increased supplies of gas from shale have cut spot gas prices by more than half. Indeed, Washington has been saying that the US will be energy sufficient by 2015.
The physical difference between shale and conventional gas is the location of the resource in rock formations. The low permeability of shale and its tendency to run in horizontal layers mean that conventional drilling techniques with a vertical well are unable to recover commercially viable amounts of shale gas, says the report.
To overcome this difficulty, an approach using hydraulic fracturing ("fracking") and horizontal drilling has been developed. This approach, however, brings consequences not found using conventional gas exploitation techniques.
