Oz firm set to frack in Karoo

Charlotte Mathews and Cindy Preller

AN Australian oil and gas exploration firm is poised to explore for shale gas in the Karoo.

The Australia-listed company, Challenger Energy, expects the government's processing of its application for shale gas exploration rights in the Eastern Cape to start "early this year", with managing director Robert Willes saying this week it was likely the regulations would come into effect before this year's national and provincial elections.

Challenger‚ through its 95%- held South African subsidiary Bundu Gas and Oil Exploration in which local entrepreneur Donald Ncube is the holder of the remaining 5% stake‚ said it was the "first mover" in the Karoo's shale gas fields.

Responding to Challenger Energy's readiness to frack in the Karoo, Treasure Karoo Action Group chief executive Jonathan Deal said the company's statements on when regulations would go through seemed accurate. "However, I don't see how the government can possibly complete their deliberations and the debate before the elections."

He also pointed out a 2011 letter to shareholders by Sunset Energy, which was Challenger Energy's previous name, in which it was stated that the company's initial application was rejected and that "by leveraging of our connections in South Africa" a new application for a larger area was made.

The company's current exploration rights application is for what it refers to as the Cranemere Project, encompassing 3100km² in the southern Karoo belt. Willes said the company was in discussions with potential "farm-in" partners who could contribute both funding and expertise in various areas.

A "farm-in" partner is a company that can earn an interest in a licence area by contributing funding towards defined milestones.

Willes said there were no plans to list Challenger on the JSE

The government has placed a moratorium on the issue of exploration rights for shale gas until the necessary regulations are passed. These have been drafted and circulated for comment.

The government has also proposed taking a 20% free carry in future oil and gas developments‚ with an option to buy another 30% at market-related prices.

Willes said South Africa had potentially huge shale gas resources. " The government wants to move forward with this."