Shale gas development to boost South Africa’s budget deficit – KPMG study

morning shot of Nexen's two shale gas rigs in the  Horn River Basin at Dilly Creek. These two  rigs, Nabors 16-17,  have just begun drilling in early February of 2010 with an expected completion date in  late April. Nexen has a 100 percent interest in 85,000 acres in the northeastern part of B.C., Canada.

*Morning shot of Nexen’s two shale gas rigs in the Horn River Basin at Dilly Creek. Nexen has a 100 percent interest in 85,000 acres in the northeastern part of B.C., Canada.

Kunle Kalejaye

12 October 2016, Sweetcrude, Lagos — Onshore natural (shale) gas development in South Africa is likely to improve the region’s budget deficit, lead to economic growth and increase employment opportunities as well as boost overall income, according to a new study by KPMG Services.

The independent study, “Potential Benefits of Onshore Gas Development in South Africa,”which was commissioned by Rhino Resources, Ltd., and obtained by SweetcrudeReports from www.rhinoresourcesltd.com examined the natural gas industry’s potential contribution to economic development in South Africa. It found that for every R1 million of future sales generated through natural gas production, an additional R1.3 million could potentially be added to the South African economy. In addition, for every R1 million of sales generated by the local gas industry, four jobs could potentially be created and sustained both directly and indirectly in the region.

“As illustrated by the study, South African natural gas development and overall energy industry growth could lead to various economic and social benefits such as increased employment, labor income, government revenue and economic growth,” said Rhino Resources President and CEO Patrick Mulligan, whose company has built a portfolio of onshore and offshore oil and gas assets over East, South and West Africa that includes five onshore areas totalling nearly 32,600 square kilometers within South Africa.

“While South Africa’s natural gas industry is still in a relatively early stage of development, the region – particularly its onshore Karoo basin – holds valuable resources for potential growth and production. We’ve been extremely encouraged by the results of our early stage evaluations of the basin to date and look forward to further developing these promising resources.”

The report goes on to identify a number of consumer economic benefits from developing a natural gas industry in South Africa, such as an increased supply of energy, a decrease in the price of energy (electricity and fuel), an indirect decrease in prices of other goods and services and business and investment opportunities for local enterprises. The study also reveals how South African shale gas development could lead to increased household income, enhanced infrastructure, energy supply certainty, improved living standards as well as a cleaner environmental footprint in the case of natural gas substituting coal for power generation.

“We strongly believe South Africa’s energy resources can one day enhance prosperity for the country’s communities,” added Mulligan. “To the surprise of many, South Africa is ranked 8th in terms of countries with the top global shale gas resources according to the U.S. Energy Information Administration’s World Shale Resource Assessments.”

Additional findings in the study included:

  • Increased tax revenue – an additional R34 000 of government revenue could potentially be added to the national government discuss for every R1 million of sales generated in the natural gas industry.
  • Poverty alleviation – future sales generated implies poverty alleviation impact for the South African economy, about 3.3 percent of additional household income could potentially flow to low-income households.
  • Increased investment – stimulates other industries in the economy through various linkages and in turn contributing directly to economic development through creating employment, tax revenue, economic growth and large amounts of investment.
  • Improved balance of payments – by exporting natural gas the balance on current account could be positively impacted contributing to reducing the overall balance on the current account deficit.
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