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If shale gas production takes off around the world in the same way it has in the United States, energy analysts expect to see a significant shift in the global energy game. Large deposits have been found in many places, including nations that are among the world's largest energy consumers: China, Argentina, South Africa, Australia, India, Pakistan, and a handful of countries in Europe.
Many of these countries have developed economies and energy infrastructure in place. South Africa is a developed economy that lacks infrastructure, and may prove to be our first insight into how a country's changing energy needs are addressed logistically.
South Africa's energy issue is crushing its economy. Its energy grid is overburdened, and high energy tariffs are stifling business opportunities, particularly those in the agriculture and manufacturing sectors.
The country relies mostly on coal for its energy -- and has for decades. Though South Africa has an abundance of the resource, the environmental impact of coal and the country's increasing demand for energy have put pressure on the government to diversify its energy sources. Right now, one company, state-owned Eskom, provides a staggering 95% of the country's electricity.
In 2010, the government created a 20-year plan with the goal of having natural gas provide 6% of the nation's new electricity generation. That is not a lot, but coal is so cheap, it becomes difficult to push the development of gas. That may be changing, however, as South Africa begins to realize the potential of its shale gas deposits.
Hello, natural gas deposits
The Energy Information Administration estimates that South Africa could have as much as 485 trillion cubic feet of shale gas reserves. Right now gas accounts for only 3% of the country's energy supply. The country's main gas operator, Sasol (NYSE: SSL ) , produces the gas in Mozambique and then ships it via a 535-mile pipeline.
When gas is available, it is much easier to bring it onto the grid than it is to build a new coal-fired power plant to meet demand. A recent poll commissioned by Royal Dutch Shell (NYSE: RDS-A ) found that 73% of South Africans are open to the idea of natural gas extraction in the Karoo region, if initial exploration proves reserves are commercially viable. Farmers in the Karoo feel differently, and South Africa may well end up facing the same local opposition to hydraulic fracturing that occurs in the U.S.
Essentially, because South Africa's reserves are untested, and no one is entirely sure of their commercial viability, it remains a giant question mark. Importing gas is an option, but as the U.S. knows well, imports are more expensive than domestic production, and a single pipeline from Mozambique isn't going to cut it, either.
South Africa is considering all of its options to improve its energy situation, including solar, nuclear, and wind.
Sasol has commissioned a study from a private California company, BrightSource Energy, on the viability of a solar thermal plant. The plant would generate 125 megawatts of power and would use mirrors or lenses to focus sunlight on liquids, which would heat up and generate steam to power turbines. The study should be completed by the third quarter of this year.
Additionally, the South African Department of Energy has selected a company called BioTherm Energy to produce two 10-kilowatt photovoltaic projects, as well as one 27-kilowatt wind project. Construction on the projects will begin in the third quarter of this year, and should be completed by the second quarter of 2013.
And then there's nuclear power. The country is evaluating proposals to spend about $39 billion to build nuclear power plants with the capacity to deliver 9,600 megawatts of energy by 2029. Potential bidders for the nuclear projects include Toshiba Corp.'s Westinghouse Electric, Korea Electric Power (NYSE: KEP ) , and Areva SA.
As South Africa proceeds down its path to a diverse energy future, it makes sense to track not only the process, but what companies are involved, and what energies ultimately end up taking off. Many, many countries will follow as the world's demand for energy grows in the coming years.