Hon Speaker, hon members and fellow South Africans, may I begin by thanking you for affording me this rare opportunity to inform this House about a subject so crucial to the future of our country. This subject relates to the potential occurrence of a world- class shale gas deposit, which is estimated to be the fifth largest in the world. As the potential was brought to our attention, we needed to understand the implications of developing this resource.
In February 2011, I accordingly instituted a moratorium on the acceptance and processing of new applications involving hydraulic fracturing. It is now history that Cabinet subsequently endorsed the moratorium on the processing of these applications; that was both responsible and cautionary.
Against this background, I would like to appraise this House on the critically important decision by Cabinet to approve the report of the task team on shale gas, and the subsequent decision to lift the moratorium on the processing of applications for exploration in the Karoo, which is well known for its vast plains and tender lamb.
Cabinet decided on 21 August 2012 that only normal exploration will take place until we have put in place a proper and relevant regulatory framework, and until we would be satisfied that we can deal adequately with the consequence of the technique known as hydraulic fracturing. A monitoring committee will be established to ensure that these things happen.
The establishment of appropriate regulations, control and co-ordination systems is expected to take six to 12 months. When and if hydraulic fracturing eventually happens, it will be authorised under the strict supervision of the monitoring committee. In the event of any unacceptable outcomes, the process may be halted. In this regard, there will be an ongoing research facilitated by relevant institutions to develop and enhance scientific knowledge. This includes, but is not limited to, the geohydrology of the prospective areas, methodologies for hydraulic fracturing in South Africa and an environmental impact. Cabinet decided on the development of an action plan to give effect to these recommendations. The plan must be properly resourced and be incorporated into programmes of the relevant department and agencies.
The Karoo is indeed a delicate place and this is a delicate subject. It is a place where there are competing economies and other interests covering diverse areas such as farming, a site for the Square Kilometre Array, SKA, and uranium reserves, potential for solar panels to drive renewable energy initiatives, as well as being the store chest of South Africa's fossils.
I would like to assure hon members that the government is approaching this subject with the outmost responsibility and sensitivity, guided by an imperative to balance development with both social and environmental considerations.
We are acutely conscious of the fact that people elect public representatives to make laws, foster development, ensure that jobs are created and see that services such as education, health and welfare, are rendered to the country in an environmentally sustainable manner. The reconciliation of these challenges is what public office is about. It is expected of us, as the nation's legislators, to rise to the challenge.
The government will explore all avenues in search for sources of energy, while, indeed, virtually the entire world is grappling with energy security and energy independency.
We are living in an era where globalisation is taking place at lighting speed. As John Donne has said centuries ago, and I quote, "No man is an island, complete unto himself." This has never been truer than now. So people may understandably ask why Cabinet has endorsed the decision to suspend the issuing of shale exploration licenses, when some societies, especially those in the developing South, would most happily take advantage of the potential represented by shale gas.
It has to be recognised that this subject has divided our citizens into two; those for and those against. I am sure that even if we are taking the decision, which we mark in this statement today, those divisions will have not disappeared.
The role of government is to seek middle ground in the interest of our country. We have dealt with this matter in the best possible way. We have established a task team to evaluate the use of the hydraulic fracturing technique in the extraction of shale gas. It comprises representatives from the following: Department of Water and Environmental Affairs, Department of Science and Technology, Department of Energy, Department of Mineral Resources, the Petroleum Agency SA, the Council for Geoscience, the SKA SA, the Water Research Commission and Eskom.
The task team, in turn, appointed a working group of experts, which brought on board technical advisors and academics from the University of the Free State and the University of the Western Cape, which serves as a reference group. This team was tasked with evaluating the potential environmental risks posed by the use of hydraulic fracturing as a method of extracting shale gas, and the negative and possible social and economic impacts that shale gas exploitation have, as identified in the Karoo Basin. It also embarked on an international study tour of jurisdictions with a matured regulatory framework in this field, namely Pennsylvania and Texas. It has also visited the Environmental Protection Agency and the Railroad Commission of Texas - of which both are United States regulatory organisations directly involved with shale gas exploitation.
This was done to ensure that we thoroughly investigate this matter before crucial decisions are taken. It was an important assignment because even before we had the benefit of actual exploration, we needed to study and respond to the concerns that were being raised by various interest groups. In a meeting with political parties represented in this House last week, we briefed them about the report of the task team and its findings. We all know what happened in 2008 when we experienced load shedding. We all know about being exposed to Eskom's power alerts every night, as we all are told to save electricity because demand outstrips our supplies. We all also know about the binding constraints to growth, a central feature being the paucity of energy. The country's Integrated Resource Plan of 2010 has an initial provision for 2400 MegaWatt of gas, which sources have not yet identified. This offers us the possibility to close the gap.
As government, we have taken a position to reduce the country's overdependence on coal, thereby addressing the challenges posed by climate change on coal and greenhouse gas emissions. A strategy was outlined in our long-term mitigation scenarios and commitments were made by President Zuma in Copenhagen, including those we made at the successful gathering of the 17th Conference of Parties, COP 17, which was held in Durban.
We are, therefore, pleased that Cabinet has endorsed the decision to lift the moratorium so that we can embark on a process to verify the resource of which technical recoverability has been estimated at 485 trillion cubic feet of gas.
A significant exploration still has to be undertaken in the form of, amongst others, geophysical surveys and drillings. It is worth stating that the hydraulic fracturing technique has been in use in the traditional oil and gas industry for more than 50 years. And in the past 20 years, together with the practise of directional drilling, it has made the exploitation of shale gas resources more environmentally, technically and economically feasible.
The importance of this potential resource cannot be overemphasised, given the fact that Mossgas, now PetroSA, gas-to-liquid facilities in Mossel Bay, was established only with the resource of one trillion cubic feet of gas. It is now a fact that this important strategic asset, in the hands of a democratic state, has brought life in this coastal city by employing 1600 people, resulting in a huge multiplier effect on the broader economy.
As government, we say to our critics that they should study the full impact of this resource, particularly given the impact of the possibility that lies ahead. Even with a conservative estimate of 30 trillion cubic feet, using the indicative price of US$4 per 1000 cubic feet of gas at an exchange rate of R8 per dollar, the gross value of this resource to us would be in the region of almost R1 trillion. This is over and above the balance of payment implications for our country.
Of importance are the economic benefits that our people expect from the resource beneath the soil. This is expressed in the various protests that occasionally take place in areas that are rich in resources, where people expect localisation to take place.
The communities are clamouring to see the real benefit in terms of jobs and opportunities. If the resource is proven to be economically viable, and building on the lessons learnt, we will ensure that workers, communities and the country at large benefit. In the same vein, this will also benefit the broader economy, including the critical area of localisation. The ANC has been raising the issue of localisation for decades. It is expressed sharply in the Freedom Charter and in other policy documents of the movement.
As a democratic state, we will do everything possible to ensure that we listen to the views of the public, as mandated by Cabinet. We will embark on public consultations with all interested and affected parties, in addition to the regulatory public consultations that usually accompany the environmental impact assessment process.
We are also mindful that South Africa has been awarded the right to host the SKA. Working together with the Ministry of Science and Technology, we will ensure that any exploitation of this resource coexists with this important science project.
You are well aware that the Mineral and Petroleum Resources Development Act has rested the country's mineral resources in the hands of the state. Given the strategic nature of this potentially huge resource, the state will have to take a direct interest in this issue on behalf of all South Africans. This should not be allowed to degenerate into a few politically connected people benefiting from it.
I call on all political parties represented in this House to support the position that we have taken on this potentially divisive matter. We have to use our collective minds to deal with this subject in a manner that ensures that we take steps to reindustrialise our country and diversify our energy mix, as outlined in the Integrated Resource Plan. We will act urgently and responsibly, whilst protecting the environment, including our water resources. If we do so, we will banish into history the dire warning of V S Naipaul, the perennial Afro pessimist, who once wrote, and I quote, "The world is what it is, and those who are nothing will forever remain nothing."
Our history in South Africa, over nearly two decades, has shown that we care. Those who seemed to be nothing are indeed everything. History places us in a position to rewrite its course and prove our critics wrong. We have made a good start in South Africa. We can use this shale gas challenge to unite our country and forge a common vision of a truly successful nation.
I would like to inform this House and the South African public that a detailed report will be available on our departmental website by the end of this week. May I conclude by saying, may God bless all of us in South Africa as we embark on this journey. I thank you. [Applause.]