Challenger Energy Ltd - ASX · 2013-07-28 · Technical indicators. > Charting library Home >...
Transcript of Challenger Energy Ltd - ASX · 2013-07-28 · Technical indicators. > Charting library Home >...
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Challenger Energy Ltd Investor Presentation
July 2013
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Disclaimer
This announcement contains “forward-looking statements”. Such forward-looking statements include, without limitation: estimates of future earnings, the sensitivity of earnings to oil & gas prices and foreign exchange rate
movements; estimates of future oil & gas production and sales; estimates of future cash flows, the sensitivity of cash flows to oil & gas prices and foreign exchange rate movements; statements regarding future debt repayments;
estimates of future capital expenditures; estimates of reserves and statements regarding future exploration results and the replacement of reserves; and where the Company expresses or implies an expectation or belief as to future
events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, forward looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by such forward-looking statements.
Such risks include, but are not limited to oil and gas price volatility, currency fluctuations, increased production costs and variances in reserves or recovery rates from those assumed in the company’s plans, as well as political and
operational risks in the countries and states in which we operate or sell product to, and governmental regulation and judicial outcomes. For a more detailed discussion of such risks and other factors, see the Company’s Annual Reports,
as well as the Company’s other filings. The Company does not undertake any obligation to release publicly any revisions to any “forward looking statement” to reflect events or circumstances after the date of this release, or to
reflect the occurrence of unanticipated events, except as may be required under applicable securities laws.
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Agenda
!! Company Overview
!! Cranemere Project
!! South Africa – context
!! Summary & Conclusions
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Company Overview !! Presently focused on world class shale play in the Karoo Basin, South Africa
!! Discovered gas !! Potentially transformational to the SA economy, highly motivated government
!! A company making opportunity - Challenger the only ASX small cap with exposure to SA shale gas
!! Permit award next major value catalyst !! First mover, awaiting award of exploration license for ~800,000 acres !! Balance of play fairway under application by Shell, Falcon (& Chevron via farm-in)
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!! New management team - on the cusp of dramatic growth
!! Robert Willes – MD (ex BP, Eureka) !! Bill Bloking – (ex BHPB, Exxon, Eureka) !! Management strongly aligned via equity !! Emerging strategy
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Financial Overview
Fully paid ordinary shares 311,482,540
Unlisted Options1 25,000,000
Share Price2 A$0.07
Market capitalisation2 A$21.8m
Cash3 A$0.28m
Shareholders 1011
Top 20 44.81%
1.! Option exercise prices range from $0.15-$0.35 with exercise dates of February 2014 to November 2016 2.! As at 26th July 2013 3.! As at 30th June 2013
!"#$%&'$()%&'%$*+$,#-)%&./!01&2345& 2#6(7#8&!7$9)79$%&
LQ Super Pty Ltd 12.89%
Pitt Street Absolute Return Pty Ltd and related entities
5.46%
Challenger Directors 2.46%
!(:-(;)#-7&!"#$%"+8<%$=&
Liquidity2
One Month $423,605
Six Months $2,417,607
One Year $13,424,318
Broker Value Buy Vol Sell Vol Traded %
Commonwealth $4,662,209 27,061,474 29,629,146 17.5 E-Trade $4,568,086 26,427,070 29,262,806 17.2 Morg Smith $4,563,497 46,085,137 13,921,770 17.1 Patersons $2,223,338 18,171,601 8,264,797 8.4 UBS $2,205,431 4,865,113 21,064,879 8.3 State One Stock $2,156,980 11,843,438 11,843,438 8.1 Bell Potter $1,408,152 7,010,000 10,976,250 5.3 AIEX $938,485 5,536,756 6,279,725 3.5 BBY $807,240 4,767,047 4,646,047 3.0 Pershing $616,433 695,000 8,003,173 2.3
Traded Market Share 1/7/12 – 30/6/13
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Board & Management Team Chairman
Michael Fry Managing Director
Robert Willes Adviser
Bill Bloking Technical Director
Paul Bilston Country Manager
Peter Price
Qualifications B.Com (UWA), F.Fin BA (Hons), MAICD BSc Mech Eng (Summa cum Laude), FAICD
B.Eng, PhD. MSc, Royal School of Mines, MSAIMM
International Experience
USA, Australia UK, Norway, Algeria, Belgium, Australia, Asia
USA, Australia, Asia, Europe, South America
Australia, Asia, USA, South Africa
South Africa, Zimbabwe, Zambia, UK, Belgium
Relevant Experience
!! Chairman Red Fork Energy Limited (RFE)
!! Chairman Norwest Energy NL (NEW)
!! Past Member ASX
!! Treasury management
!! CEO Eureka Energy Ltd
!! Head of Business Development, Asia Pacific – BP Australia & Indonesia
!! GM Browse & Greater Gorgon – BP Australia
!! GM North West Shelf – BP Australia
!! Project Manager M&A – BP London
!! Negotiator Gas Marketing - BP Gas & Power UK
!! MD Eureka Energy Ltd
!! President Australia/Asia Gas - BHP Billiton
!! COO - Esso Eastern Products Trading Co
!! Senior Adviser – Exxon Corp Strategic Planning
!! GM Gas – Esso Indonesia
!! Manager, Supply Operations Far East & Western Hemisphere – Exxon
!! Former MD Challenger Energy Ltd (CEL)
!! GM Lucas Energy
!! Manager, Operated Assets – AGL Energy Ltd
!! Client Program Manager – Agility
!! Group Manager, Oil & Gas - GHD
!! Country Manager – Molopo (MPO)
!! Independent consulting engineer
!! GM Mining - Babcock Industrial Contractors
!! MD, Ops Mgr,Consulting Engineer – Rand London Corp
!! Various roles – Anglovaal South Africa, Anglo American Zambia, Lonhro Rhodesia
Citizenship Australia UK/Australia US/Australia Australia UK
Industry Experience
7 yrs E&P (30 yrs Capital markets)
26 yrs 39 yrs 20 yrs 55 yrs
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World Scale Opportunity
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Proven Gas to Surface !! Permit of ~ 800,000 acres centred on only well
within the basin to flow significant gas to surface (Cranemere)
!! CEL first mover - Shell and Falcon/Chevron pursuing adjacent acreage
Basin Resource Potential (U.S. Energy Information Administration June 2013) !! Estimated 370 tcf technically recoverable !! Ranked #8 globally
Partner & Work Programme !! Black Economic Empowerment (BEE) Partners
in place !! Advanced discussions with farm-in partners
Key Events !! Moratorium lifted September 2012 !! Chevron announced AMI and farm-in with
Falcon Dec 2012 !! Awaiting award of Exploration Right –
anticipated early 2014
Challenger now the only small cap player with exposure to this play. F
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Investment Case
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Recent transactions demonstrate increasing market value of acreage as it progresses towards commercialisation. (CEL ~800,000 acres, market cap $21.8m1)
Key parameters for commercialisation are underpinned by supportive government. Infrastructure and supply chain will develop as resource scale becomes clear.
Recent transactions demonstrate increasing market value of acreage as it progresses towards
(CEL ~800,000 acres, market cap $21.8m
0 2000 4000 6000 8000
10000 12000 14000 16000 18000 20000
Trends Undeveloped Appraisal Production
$'000
$40 / acre • ConocoPhillips / New Standard Energy (AUS) Jul ‘11 • Mitsubishi /Buru Energy (AUS) Dec ’11 • BG Group / Drillsearch – (AUS)Jul ’11 • Total/Central Petroleum (AUS) Nov ‘12 • Statoil / Petrofrontier (AUS) Jun ‘12
$844 / acre • ExxonMobil / Americas Petrogas (ARG) Aug ’11 • Beach Energy / Adelaide Energy (AUS) Jan ‘12 • Chevron / Beach Energy (AUS) Feb ‘13
$4,009 / acre • Statoil / Chesapeake Energy (US) Nov ‘08 • KKR / Hilcorp Resources (US)Jun ’10 • Hess / Consol (US) Oct ’11 • Aurora Oil & Gas / Eureka (AUS) Aug 12
$18,489 / acre • Korea National Oil / Anadarko US Mar ’11 • Marathon / Hilcorp Resources US Jun ‘11 • Mitsui / SM Energy (US) Jun ‘12 • Osaka Gas / Cabot Oil (US) Jun ‘12
1 : Information current as at 26 July 2013.
Source: Company view
Source: Company presentations, Dolmen broker report Gas Market Fundamentals
Gas Price
Infrastructure
Supply Chain
Land Access
Environment/Regulation
Water
Fiscal Terms
Resource Upside
Technology Upside
Unconventional Play Service – Karoo Basin – Shale
Unconventional Play Service Analysis - November 2012 Page 10 of 15
Key Commercialisation Issues
Karoo Basin Commercialisation Index
Gas Market Fundamentals
Gas Price
Infrastructure
Supply Chain
Land Access
Environment/Regulation
Water
Fiscal Terms
Resource Upside
Technology Upside
Good Fair Poor
Source: Wood Mackenzie
Gas Market
In the near term, GTL and industrial customers will be the target market for gas from shales, but both require relatively small volumes. South Africa currently relies entirely on its massive coal resources for cheap and readily available power generation. Switching to gas for power generation cannot happen without strong political pressure to reduce South Africa’s carbon emissions. Government officials are delaying the reduction in coal usage, arguing that the cheap power promotes economic growth. Increased energy prices to the end user would be very unpopular, but the future of shale gas may come down to a long-term bet that South Africa will seek to reduce its dependency on coal for power generation, and invest in gas power plants. The government is supportive of gas developments as a means of improving energy security, and avoiding shortfalls in power supply as seen in 2008 and 2009. Achieving viable gas-prices will be key.
South African conventional gas supply is forecast to remain low. Around 240 mmcfd is produced from two offshore gas developments, Block 9 (E-M and F-A) and South Coast. Gas is also imported from Mozambique.
Existing GTL plant customers support relatively high prices (linked to Brent). South African company Sasol and Shell are leaders in GTL technology, and Sasol's integrated Mossel Bay project is well positioned to take future shale gas. Conventional gas production is in decline and Mossel Bay will need alternative sources to maintain production. The plant cannot operate below 144 mmcfd, and unless substantial volumes of gas can be supplied quickly, minimum operating volume may be permanently reduced, to 90 mmcfd for example. This could potentially reduce future gas demand. There are only two GTL plants in South Africa, and building a new plant would take a decade and require over US$10 billion of investment. Shale gas is a viable option to make up the short fall in supplies to Mossel Bay, but the distance between the plant and shale gas exploration areas (minimum 160 kilometres) will make transporting the gas difficult and expensive.
Heavy industry and petrochemical companies are also a potential market for shale gas. Inconveniently, most demand is located in the east near Johannesburg and Durban, and away from those areas with the highest shale gas potential. Infrastructure projects linking the source gas to the end user are likely to be challenging and very costly.
In the long-term, South Africa may look to export shale gas via pipeline to surrounding countries. The technical and commercial feasibility coupled with future competition from East Africa LNG makes the outlook for export gas highly uncertain though.
Unconventional Play Service – Karoo Basin – Shale
Unconventional Play Service Analysis - November 2012 Page 10 of 15
Key Commercialisation Issues
Karoo Basin Commercialisation Index
Gas Market Fundamentals
Gas Price
Infrastructure
Supply Chain
Land Access
Environment/Regulation
Water
Fiscal Terms
Resource Upside
Technology Upside
Good Fair Poor
Source: Wood Mackenzie
Gas Market
In the near term, GTL and industrial customers will be the target market for gas from shales, but both require relatively small volumes. South Africa currently relies entirely on its massive coal resources for cheap and readily available power generation. Switching to gas for power generation cannot happen without strong political pressure to reduce South Africa’s carbon emissions. Government officials are delaying the reduction in coal usage, arguing that the cheap power promotes economic growth. Increased energy prices to the end user would be very unpopular, but the future of shale gas may come down to a long-term bet that South Africa will seek to reduce its dependency on coal for power generation, and invest in gas power plants. The government is supportive of gas developments as a means of improving energy security, and avoiding shortfalls in power supply as seen in 2008 and 2009. Achieving viable gas-prices will be key.
South African conventional gas supply is forecast to remain low. Around 240 mmcfd is produced from two offshore gas developments, Block 9 (E-M and F-A) and South Coast. Gas is also imported from Mozambique.
Existing GTL plant customers support relatively high prices (linked to Brent). South African company Sasol and Shell are leaders in GTL technology, and Sasol's integrated Mossel Bay project is well positioned to take future shale gas. Conventional gas production is in decline and Mossel Bay will need alternative sources to maintain production. The plant cannot operate below 144 mmcfd, and unless substantial volumes of gas can be supplied quickly, minimum operating volume may be permanently reduced, to 90 mmcfd for example. This could potentially reduce future gas demand. There are only two GTL plants in South Africa, and building a new plant would take a decade and require over US$10 billion of investment. Shale gas is a viable option to make up the short fall in supplies to Mossel Bay, but the distance between the plant and shale gas exploration areas (minimum 160 kilometres) will make transporting the gas difficult and expensive.
Heavy industry and petrochemical companies are also a potential market for shale gas. Inconveniently, most demand is located in the east near Johannesburg and Durban, and away from those areas with the highest shale gas potential. Infrastructure projects linking the source gas to the end user are likely to be challenging and very costly.
In the long-term, South Africa may look to export shale gas via pipeline to surrounding countries. The technical and commercial feasibility coupled with future competition from East Africa LNG makes the outlook for export gas highly uncertain though.
Unconventional Play Service – Karoo Basin – Shale
Unconventional Play Service Analysis - November 2012 Page 10 of 15
Key Commercialisation Issues
Karoo Basin Commercialisation Index
Gas Market Fundamentals
Gas Price
Infrastructure
Supply Chain
Land Access
Environment/Regulation
Water
Fiscal Terms
Resource Upside
Technology Upside
Good Fair Poor
Source: Wood Mackenzie
Gas Market
In the near term, GTL and industrial customers will be the target market for gas from shales, but both require relatively small volumes. South Africa currently relies entirely on its massive coal resources for cheap and readily available power generation. Switching to gas for power generation cannot happen without strong political pressure to reduce South Africa’s carbon emissions. Government officials are delaying the reduction in coal usage, arguing that the cheap power promotes economic growth. Increased energy prices to the end user would be very unpopular, but the future of shale gas may come down to a long-term bet that South Africa will seek to reduce its dependency on coal for power generation, and invest in gas power plants. The government is supportive of gas developments as a means of improving energy security, and avoiding shortfalls in power supply as seen in 2008 and 2009. Achieving viable gas-prices will be key.
South African conventional gas supply is forecast to remain low. Around 240 mmcfd is produced from two offshore gas developments, Block 9 (E-M and F-A) and South Coast. Gas is also imported from Mozambique.
Existing GTL plant customers support relatively high prices (linked to Brent). South African company Sasol and Shell are leaders in GTL technology, and Sasol's integrated Mossel Bay project is well positioned to take future shale gas. Conventional gas production is in decline and Mossel Bay will need alternative sources to maintain production. The plant cannot operate below 144 mmcfd, and unless substantial volumes of gas can be supplied quickly, minimum operating volume may be permanently reduced, to 90 mmcfd for example. This could potentially reduce future gas demand. There are only two GTL plants in South Africa, and building a new plant would take a decade and require over US$10 billion of investment. Shale gas is a viable option to make up the short fall in supplies to Mossel Bay, but the distance between the plant and shale gas exploration areas (minimum 160 kilometres) will make transporting the gas difficult and expensive.
Heavy industry and petrochemical companies are also a potential market for shale gas. Inconveniently, most demand is located in the east near Johannesburg and Durban, and away from those areas with the highest shale gas potential. Infrastructure projects linking the source gas to the end user are likely to be challenging and very costly.
In the long-term, South Africa may look to export shale gas via pipeline to surrounding countries. The technical and commercial feasibility coupled with future competition from East Africa LNG makes the outlook for export gas highly uncertain though.
Unconventional Play Service – Karoo Basin – Shale
Unconventional Play Service Analysis - November 2012 Page 10 of 15
Key Commercialisation Issues
Karoo Basin Commercialisation Index
Gas Market Fundamentals
Gas Price
Infrastructure
Supply Chain
Land Access
Environment/Regulation
Water
Fiscal Terms
Resource Upside
Technology Upside
Good Fair Poor
Source: Wood Mackenzie
Gas Market
In the near term, GTL and industrial customers will be the target market for gas from shales, but both require relatively small volumes. South Africa currently relies entirely on its massive coal resources for cheap and readily available power generation. Switching to gas for power generation cannot happen without strong political pressure to reduce South Africa’s carbon emissions. Government officials are delaying the reduction in coal usage, arguing that the cheap power promotes economic growth. Increased energy prices to the end user would be very unpopular, but the future of shale gas may come down to a long-term bet that South Africa will seek to reduce its dependency on coal for power generation, and invest in gas power plants. The government is supportive of gas developments as a means of improving energy security, and avoiding shortfalls in power supply as seen in 2008 and 2009. Achieving viable gas-prices will be key.
South African conventional gas supply is forecast to remain low. Around 240 mmcfd is produced from two offshore gas developments, Block 9 (E-M and F-A) and South Coast. Gas is also imported from Mozambique.
Existing GTL plant customers support relatively high prices (linked to Brent). South African company Sasol and Shell are leaders in GTL technology, and Sasol's integrated Mossel Bay project is well positioned to take future shale gas. Conventional gas production is in decline and Mossel Bay will need alternative sources to maintain production. The plant cannot operate below 144 mmcfd, and unless substantial volumes of gas can be supplied quickly, minimum operating volume may be permanently reduced, to 90 mmcfd for example. This could potentially reduce future gas demand. There are only two GTL plants in South Africa, and building a new plant would take a decade and require over US$10 billion of investment. Shale gas is a viable option to make up the short fall in supplies to Mossel Bay, but the distance between the plant and shale gas exploration areas (minimum 160 kilometres) will make transporting the gas difficult and expensive.
Heavy industry and petrochemical companies are also a potential market for shale gas. Inconveniently, most demand is located in the east near Johannesburg and Durban, and away from those areas with the highest shale gas potential. Infrastructure projects linking the source gas to the end user are likely to be challenging and very costly.
In the long-term, South Africa may look to export shale gas via pipeline to surrounding countries. The technical and commercial feasibility coupled with future competition from East Africa LNG makes the outlook for export gas highly uncertain though.
Unconventional Play Service – Karoo Basin – Shale
Unconventional Play Service Analysis - November 2012 Page 10 of 15
Key Commercialisation Issues
Karoo Basin Commercialisation Index
Gas Market Fundamentals
Gas Price
Infrastructure
Supply Chain
Land Access
Environment/Regulation
Water
Fiscal Terms
Resource Upside
Technology Upside
Good Fair Poor
Source: Wood Mackenzie
Gas Market
In the near term, GTL and industrial customers will be the target market for gas from shales, but both require relatively small volumes. South Africa currently relies entirely on its massive coal resources for cheap and readily available power generation. Switching to gas for power generation cannot happen without strong political pressure to reduce South Africa’s carbon emissions. Government officials are delaying the reduction in coal usage, arguing that the cheap power promotes economic growth. Increased energy prices to the end user would be very unpopular, but the future of shale gas may come down to a long-term bet that South Africa will seek to reduce its dependency on coal for power generation, and invest in gas power plants. The government is supportive of gas developments as a means of improving energy security, and avoiding shortfalls in power supply as seen in 2008 and 2009. Achieving viable gas-prices will be key.
South African conventional gas supply is forecast to remain low. Around 240 mmcfd is produced from two offshore gas developments, Block 9 (E-M and F-A) and South Coast. Gas is also imported from Mozambique.
Existing GTL plant customers support relatively high prices (linked to Brent). South African company Sasol and Shell are leaders in GTL technology, and Sasol's integrated Mossel Bay project is well positioned to take future shale gas. Conventional gas production is in decline and Mossel Bay will need alternative sources to maintain production. The plant cannot operate below 144 mmcfd, and unless substantial volumes of gas can be supplied quickly, minimum operating volume may be permanently reduced, to 90 mmcfd for example. This could potentially reduce future gas demand. There are only two GTL plants in South Africa, and building a new plant would take a decade and require over US$10 billion of investment. Shale gas is a viable option to make up the short fall in supplies to Mossel Bay, but the distance between the plant and shale gas exploration areas (minimum 160 kilometres) will make transporting the gas difficult and expensive.
Heavy industry and petrochemical companies are also a potential market for shale gas. Inconveniently, most demand is located in the east near Johannesburg and Durban, and away from those areas with the highest shale gas potential. Infrastructure projects linking the source gas to the end user are likely to be challenging and very costly.
In the long-term, South Africa may look to export shale gas via pipeline to surrounding countries. The technical and commercial feasibility coupled with future competition from East Africa LNG makes the outlook for export gas highly uncertain though.
Unconventional Play Service – Karoo Basin – Shale
Unconventional Play Service Analysis - November 2012 Page 10 of 15
Key Commercialisation Issues
Karoo Basin Commercialisation Index
Gas Market Fundamentals
Gas Price
Infrastructure
Supply Chain
Land Access
Environment/Regulation
Water
Fiscal Terms
Resource Upside
Technology Upside
Good Fair Poor
Source: Wood Mackenzie
Gas Market
In the near term, GTL and industrial customers will be the target market for gas from shales, but both require relatively small volumes. South Africa currently relies entirely on its massive coal resources for cheap and readily available power generation. Switching to gas for power generation cannot happen without strong political pressure to reduce South Africa’s carbon emissions. Government officials are delaying the reduction in coal usage, arguing that the cheap power promotes economic growth. Increased energy prices to the end user would be very unpopular, but the future of shale gas may come down to a long-term bet that South Africa will seek to reduce its dependency on coal for power generation, and invest in gas power plants. The government is supportive of gas developments as a means of improving energy security, and avoiding shortfalls in power supply as seen in 2008 and 2009. Achieving viable gas-prices will be key.
South African conventional gas supply is forecast to remain low. Around 240 mmcfd is produced from two offshore gas developments, Block 9 (E-M and F-A) and South Coast. Gas is also imported from Mozambique.
Existing GTL plant customers support relatively high prices (linked to Brent). South African company Sasol and Shell are leaders in GTL technology, and Sasol's integrated Mossel Bay project is well positioned to take future shale gas. Conventional gas production is in decline and Mossel Bay will need alternative sources to maintain production. The plant cannot operate below 144 mmcfd, and unless substantial volumes of gas can be supplied quickly, minimum operating volume may be permanently reduced, to 90 mmcfd for example. This could potentially reduce future gas demand. There are only two GTL plants in South Africa, and building a new plant would take a decade and require over US$10 billion of investment. Shale gas is a viable option to make up the short fall in supplies to Mossel Bay, but the distance between the plant and shale gas exploration areas (minimum 160 kilometres) will make transporting the gas difficult and expensive.
Heavy industry and petrochemical companies are also a potential market for shale gas. Inconveniently, most demand is located in the east near Johannesburg and Durban, and away from those areas with the highest shale gas potential. Infrastructure projects linking the source gas to the end user are likely to be challenging and very costly.
In the long-term, South Africa may look to export shale gas via pipeline to surrounding countries. The technical and commercial feasibility coupled with future competition from East Africa LNG makes the outlook for export gas highly uncertain though.
Unconventional Play Service – Karoo Basin – Shale
Unconventional Play Service Analysis - November 2012 Page 10 of 15
Key Commercialisation Issues
Karoo Basin Commercialisation Index
Gas Market Fundamentals
Gas Price
Infrastructure
Supply Chain
Land Access
Environment/Regulation
Water
Fiscal Terms
Resource Upside
Technology Upside
Good Fair Poor
Source: Wood Mackenzie
Gas Market
In the near term, GTL and industrial customers will be the target market for gas from shales, but both require relatively small volumes. South Africa currently relies entirely on its massive coal resources for cheap and readily available power generation. Switching to gas for power generation cannot happen without strong political pressure to reduce South Africa’s carbon emissions. Government officials are delaying the reduction in coal usage, arguing that the cheap power promotes economic growth. Increased energy prices to the end user would be very unpopular, but the future of shale gas may come down to a long-term bet that South Africa will seek to reduce its dependency on coal for power generation, and invest in gas power plants. The government is supportive of gas developments as a means of improving energy security, and avoiding shortfalls in power supply as seen in 2008 and 2009. Achieving viable gas-prices will be key.
South African conventional gas supply is forecast to remain low. Around 240 mmcfd is produced from two offshore gas developments, Block 9 (E-M and F-A) and South Coast. Gas is also imported from Mozambique.
Existing GTL plant customers support relatively high prices (linked to Brent). South African company Sasol and Shell are leaders in GTL technology, and Sasol's integrated Mossel Bay project is well positioned to take future shale gas. Conventional gas production is in decline and Mossel Bay will need alternative sources to maintain production. The plant cannot operate below 144 mmcfd, and unless substantial volumes of gas can be supplied quickly, minimum operating volume may be permanently reduced, to 90 mmcfd for example. This could potentially reduce future gas demand. There are only two GTL plants in South Africa, and building a new plant would take a decade and require over US$10 billion of investment. Shale gas is a viable option to make up the short fall in supplies to Mossel Bay, but the distance between the plant and shale gas exploration areas (minimum 160 kilometres) will make transporting the gas difficult and expensive.
Heavy industry and petrochemical companies are also a potential market for shale gas. Inconveniently, most demand is located in the east near Johannesburg and Durban, and away from those areas with the highest shale gas potential. Infrastructure projects linking the source gas to the end user are likely to be challenging and very costly.
In the long-term, South Africa may look to export shale gas via pipeline to surrounding countries. The technical and commercial feasibility coupled with future competition from East Africa LNG makes the outlook for export gas highly uncertain though.
Unconventional Play Service – Karoo Basin – Shale
Unconventional Play Service Analysis - November 2012 Page 10 of 15
Key Commercialisation Issues
Karoo Basin Commercialisation Index
Gas Market Fundamentals
Gas Price
Infrastructure
Supply Chain
Land Access
Environment/Regulation
Water
Fiscal Terms
Resource Upside
Technology Upside
Good Fair Poor
Source: Wood Mackenzie
Gas Market
In the near term, GTL and industrial customers will be the target market for gas from shales, but both require relatively small volumes. South Africa currently relies entirely on its massive coal resources for cheap and readily available power generation. Switching to gas for power generation cannot happen without strong political pressure to reduce South Africa’s carbon emissions. Government officials are delaying the reduction in coal usage, arguing that the cheap power promotes economic growth. Increased energy prices to the end user would be very unpopular, but the future of shale gas may come down to a long-term bet that South Africa will seek to reduce its dependency on coal for power generation, and invest in gas power plants. The government is supportive of gas developments as a means of improving energy security, and avoiding shortfalls in power supply as seen in 2008 and 2009. Achieving viable gas-prices will be key.
South African conventional gas supply is forecast to remain low. Around 240 mmcfd is produced from two offshore gas developments, Block 9 (E-M and F-A) and South Coast. Gas is also imported from Mozambique.
Existing GTL plant customers support relatively high prices (linked to Brent). South African company Sasol and Shell are leaders in GTL technology, and Sasol's integrated Mossel Bay project is well positioned to take future shale gas. Conventional gas production is in decline and Mossel Bay will need alternative sources to maintain production. The plant cannot operate below 144 mmcfd, and unless substantial volumes of gas can be supplied quickly, minimum operating volume may be permanently reduced, to 90 mmcfd for example. This could potentially reduce future gas demand. There are only two GTL plants in South Africa, and building a new plant would take a decade and require over US$10 billion of investment. Shale gas is a viable option to make up the short fall in supplies to Mossel Bay, but the distance between the plant and shale gas exploration areas (minimum 160 kilometres) will make transporting the gas difficult and expensive.
Heavy industry and petrochemical companies are also a potential market for shale gas. Inconveniently, most demand is located in the east near Johannesburg and Durban, and away from those areas with the highest shale gas potential. Infrastructure projects linking the source gas to the end user are likely to be challenging and very costly.
In the long-term, South Africa may look to export shale gas via pipeline to surrounding countries. The technical and commercial feasibility coupled with future competition from East Africa LNG makes the outlook for export gas highly uncertain though.
Unconventional Play Service – Karoo Basin – Shale
Unconventional Play Service Analysis - November 2012 Page 10 of 15
Key Commercialisation Issues
Karoo Basin Commercialisation Index
Gas Market Fundamentals
Gas Price
Infrastructure
Supply Chain
Land Access
Environment/Regulation
Water
Fiscal Terms
Resource Upside
Technology Upside
Good Fair Poor
Source: Wood Mackenzie
Gas Market
In the near term, GTL and industrial customers will be the target market for gas from shales, but both require relatively small volumes. South Africa currently relies entirely on its massive coal resources for cheap and readily available power generation. Switching to gas for power generation cannot happen without strong political pressure to reduce South Africa’s carbon emissions. Government officials are delaying the reduction in coal usage, arguing that the cheap power promotes economic growth. Increased energy prices to the end user would be very unpopular, but the future of shale gas may come down to a long-term bet that South Africa will seek to reduce its dependency on coal for power generation, and invest in gas power plants. The government is supportive of gas developments as a means of improving energy security, and avoiding shortfalls in power supply as seen in 2008 and 2009. Achieving viable gas-prices will be key.
South African conventional gas supply is forecast to remain low. Around 240 mmcfd is produced from two offshore gas developments, Block 9 (E-M and F-A) and South Coast. Gas is also imported from Mozambique.
Existing GTL plant customers support relatively high prices (linked to Brent). South African company Sasol and Shell are leaders in GTL technology, and Sasol's integrated Mossel Bay project is well positioned to take future shale gas. Conventional gas production is in decline and Mossel Bay will need alternative sources to maintain production. The plant cannot operate below 144 mmcfd, and unless substantial volumes of gas can be supplied quickly, minimum operating volume may be permanently reduced, to 90 mmcfd for example. This could potentially reduce future gas demand. There are only two GTL plants in South Africa, and building a new plant would take a decade and require over US$10 billion of investment. Shale gas is a viable option to make up the short fall in supplies to Mossel Bay, but the distance between the plant and shale gas exploration areas (minimum 160 kilometres) will make transporting the gas difficult and expensive.
Heavy industry and petrochemical companies are also a potential market for shale gas. Inconveniently, most demand is located in the east near Johannesburg and Durban, and away from those areas with the highest shale gas potential. Infrastructure projects linking the source gas to the end user are likely to be challenging and very costly.
In the long-term, South Africa may look to export shale gas via pipeline to surrounding countries. The technical and commercial feasibility coupled with future competition from East Africa LNG makes the outlook for export gas highly uncertain though.
Unconventional Play Service – Karoo Basin – Shale
Unconventional Play Service Analysis - November 2012 Page 10 of 15
Key Commercialisation Issues
Karoo Basin Commercialisation Index
Gas Market Fundamentals
Gas Price
Infrastructure
Supply Chain
Land Access
Environment/Regulation
Water
Fiscal Terms
Resource Upside
Technology Upside
Good Fair Poor
Source: Wood Mackenzie
Gas Market
In the near term, GTL and industrial customers will be the target market for gas from shales, but both require relatively small volumes. South Africa currently relies entirely on its massive coal resources for cheap and readily available power generation. Switching to gas for power generation cannot happen without strong political pressure to reduce South Africa’s carbon emissions. Government officials are delaying the reduction in coal usage, arguing that the cheap power promotes economic growth. Increased energy prices to the end user would be very unpopular, but the future of shale gas may come down to a long-term bet that South Africa will seek to reduce its dependency on coal for power generation, and invest in gas power plants. The government is supportive of gas developments as a means of improving energy security, and avoiding shortfalls in power supply as seen in 2008 and 2009. Achieving viable gas-prices will be key.
South African conventional gas supply is forecast to remain low. Around 240 mmcfd is produced from two offshore gas developments, Block 9 (E-M and F-A) and South Coast. Gas is also imported from Mozambique.
Existing GTL plant customers support relatively high prices (linked to Brent). South African company Sasol and Shell are leaders in GTL technology, and Sasol's integrated Mossel Bay project is well positioned to take future shale gas. Conventional gas production is in decline and Mossel Bay will need alternative sources to maintain production. The plant cannot operate below 144 mmcfd, and unless substantial volumes of gas can be supplied quickly, minimum operating volume may be permanently reduced, to 90 mmcfd for example. This could potentially reduce future gas demand. There are only two GTL plants in South Africa, and building a new plant would take a decade and require over US$10 billion of investment. Shale gas is a viable option to make up the short fall in supplies to Mossel Bay, but the distance between the plant and shale gas exploration areas (minimum 160 kilometres) will make transporting the gas difficult and expensive.
Heavy industry and petrochemical companies are also a potential market for shale gas. Inconveniently, most demand is located in the east near Johannesburg and Durban, and away from those areas with the highest shale gas potential. Infrastructure projects linking the source gas to the end user are likely to be challenging and very costly.
In the long-term, South Africa may look to export shale gas via pipeline to surrounding countries. The technical and commercial feasibility coupled with future competition from East Africa LNG makes the outlook for export gas highly uncertain though.
Good Fair Poor
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Building the Company Growth Platform – Cranmere
"! World class exploration asset with high WI
"! Re-rating anticipated on permit award "! Advanced farm-in discussions
"! BEE partners in place "! Future Legacy Asset - leverage high value position to grow the firm
1
Enhance Sustainability of Portfolio
Identify and add assets with potential for near term development
2
Build a long-term sustainable company with a quality unconventional portfolio
Identify and secure future high potential assets
Significant shifts in oil & gas landscape create opportunities to acquire assets and form alliances
3 !! Guiding principles
!! Quality assets in advanced exploration/early development phase
!! Manage risk profile through partnerships & farm-out
!! Value accretive to CEL whilst maintaining balanced risk profile
#"
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Agenda
!! Company Overview
!! Cranemere Project
!! South Africa – context
!! Summary & Conclusions
10
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Prime Acreage Position
!! Substantial foothold in some of best acreage, adjacent to Falcon/Chevron permit area
!! The application area contains the only well to flow substantial gas to surface (unstimulated, vertical well)
!! Easier terrain than that to the north
11
Source: Company presentation
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Discovered Gas
!! Three deep, down to economic basement wells drilled in the
late sixties by SOEKOR, the government corporation
charged with finding hydrocarbons in South Africa
!! Cranemere 1/68 ostensibly drilled to test the northern
pinchout of the pre-Karoo Bokkeveldt rocks
12
Vrede 1/66
Cranemere 1/68
Schietfontein 3/670 10 20kilometres
40
23°
24°
23.5
°
24.5
°
26.5
°
25°
25.5
°
26°
-31.5 °
-32 °
-33 °
-32.5 °
-33.5 °
NOOPOORTMerriman
STEYNSBURG
MOLTENORICHMONDMeltonwald MIDDELBURG
HOFMEYR
Nieu-Bethesda
Three Sisters VERNLEIGHMURRAYSBURG
TARKASTAD
NelspoortCRADOCK
GRAAF-REINETBEAUFORT WEST
ABERDEEN
PEARSTON
BEDFORDADELAIDE
SOMERSET EAST
RietbronJANSENVILLE
KLIPPLAAT
WILLOWMORE GRAHAMSTOWNAlicedale
STEYTLERVILLE
KIRKWOOD
Addo
Cape Fold Belt
Jura
ssic
Tria
ssic
Per
mo-
Car
boni
fero
usD
evon
ian
Neo
-Pro
tKa
roo
Stormberg Group
Beaufort Group
Ecca and DwykaGroups
Cape Supergroup
Undifferentiated
ThrustBloemfontein
Cape Town
Durban
Port Elizabeth
Mmabatho Pretoria
Cranemere
Source: After Simplified Geology of South Africa Council for Geoscience 2003
Bokkeveldt Group
Table Mountain Group
0.00 10.0
10.0 100000
SP
500
500
500
1000
1000
1000
1000
1500
1500
1500
1500
2000
2000
2000
2000
2500
2500
2500
2500
3000
3000
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3000
500
500
500
3500
3500
3500
1000
3500
1000
1000
400010
00
4000
4000
4000
1500
1500
1500
450015
00
4500
4500
4500
2000
2000
2000
5000
5000
5000
2500
5000
2500
2500
550025
00
500
5500
500
5500
500
5500
3000
500
3000
3000
600030
00
1000
6000
1000
6000
1000
6000
3500
1000
3500
3500
1500
6500
1500
6500
6500
4000
4000
4000
700040
00
2000
7000
2000
7000
2000
7000
4500
2000
4500
4500
750045
00
2500 7500
2500 7500
2500 7500
5000
5000
5000
3000
8000
3000
8000
3000
8000
5500
3000
5500
5500
850055
00
3500
8500
3500
8500
3500
8500
6000
3500
6000
6000
900060
00
4000
9000
4000
9000
4000
9000
6500
6500
6500
4500 9500
4500 9500
4500 9500
7000
4500
7000
7000
1000
0
7000
5000
1000
0
5000
1000
0
5000
1000
0
7500
5000
7500
7500
1050
0
7500
5500
1050
0
5500
1050
0
8000
5500
1050
0
8000
8000
1100
0
8000
6000
1100
0
6000
1100
0
6000
1100
0
8500
6000
1100
0
8500
8500
1150
0
8500
6500
1150
0
6500
1150
0
6500
1150
0
9000
6500
9000
1200
0
9000
1200
0
9000
7000
1200
0
7000
1200
0
9500
7000
1200
0
9500
9500
1250
0
9500
7500
1250
0
7500
1250
0
7500
1250
0
1000
0 7500
1250
0
1000
010
000
1300
0
1000
0
8000
1300
0
8000
1300
0
1050
0 8000
1300
0
1050
0 8000
1050
0
1350
0
1050
0
8500
1350
0
1050
0
8500
1350
0
8500
1350
0
1100
0 8500
1350
0
1100
011
000
1400
0
1100
0
9000
1400
0
1100
0
9000
1400
0
9000
1400
0
1150
0 9000
1400
0
1150
011
500
1450
0
1150
0
9500
1450
0
9500
1450
0
1200
0 9500
1450
0
1200
0 9500
1200
0
1500
0
1200
0
1000
0
1500
0
1200
0
1000
0
1500
0
1000
0
1500
0
1250
0 1000
0
1250
0 1000
0
1250
012
500
1050
01250
0
1050
010
500
1300
0 1050
0
1300
013
000
1100
011
000
1100
011
000
1100
011
500
1150
011
500
1150
011
500
Vrede 1/66
SC 3/67
Cranemere 1
Top Ecca
Fort Brown Shale86% Shale
Middle Ecca
Lower Ecca
Whitehill and Prince Albert Fmns. - 100% Shale
Dwyka Tillite
Base Ecca
Base Permo-Carboniferous
Gas to SurfaceDSTCored Interval
Beaufort Group - Sand Silt Shale
< C
ape
Sup
ergr
oup
>
CranemereSection Through Offsetting Wells
Flattened on Top Ecca
5000
- 60
00 ft
Sha
le S
ectio
n
?
?
C1 Desorbedppm?
Ditch GasC1%
Looking North
Basal Ecca high TOC black shale 360 - 485 ft
!! Gas to surface from fractures in the Ecca shales not
anticipated
!! CR 1/68 gas log clearly shows zones of high gas readings
(red above)
!! Uniform shale sections in all wells Source: CEL and Soekor
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Geological Setting
!! Fort Brown Upper and Middle Ecca shales are deep basin turbidites deposited in the foredeep of the rising
Cape Fold Belt and are have a vertical thickness of 1,500 – 1,800 metres (5,000 – 6,000 ft)
!! Basal Ecca Shales (Whitehill & Prince Albert formations) are high TOC marine and have vertical thickness of
110 – 150 metres (360 – 485 ft)
13
Ecca Shales
Beaufort
SC 3
/67
Bloemfontein
Cape Town
Durban
Port Elizabeth
Mmabatho Pretoria
Cape Fold Belt Cr 1
/68
Stormberg
Coal Measures
Sketch SectionThrough Karoo Basin
Vr 1
/66
Cape Supergroup
Middle Ecca S
ands
Dwyka T
illite
CELLands
Source: After Winter and Venter (1970)
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Cranemere 1/68 Discovery Well !! The well entered a gas zone at approximately
8150 ft MDRT which threatened to blow out, it
was controlled by closing BOP
!! Zone interpreted as fractured Ecca Group shales
!! DST 3B over the interval 8154’ – 8312’ produced
a strong gas flow to surface which was flared, it
flowed 1.83 MMscf over a 23.6 hour period
!! Extensive core collected from CR 1/68
!! Permit surrounds well
14
Source: CR 1/68 WCR
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Permit Summary !! Applicant – Bundu Gas and Oil Exploration (Pty) Ltd – 90% owned and controlled entity of Challenger
Energy Ltd. (CEL), 10% BEE partners
!! Area – ~1 million acres (4300 km2) applied for, expecting award ~800,000 acres to allow for game parks
!! Prospectivity – EIA study inferred total of ~32tcf GIP, >7 tcf risked recoverable (excluding Fort Brown)
!! Term – 3 Years with up to three renewals not exceeding two years each
!! Anticipated Work Programme – studies, seismic reprocessing, 1-2 core holes, drill & frac one well and
production test
!! Fiscal Terms – Corporate Tax 28%, Royalty 7%
15
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Timeline & Status
16
!! New regulatory framework being developed, to be governed by revised Mineral and Petroleum Resource
Development Act. Anticipated draft framework issued for industry comment in coming months.
!! Regulator (Petroleum Agency of South Africa – PASA) anticipates ministerial approval to re-commence
processing of applications once new regulatory framework in place. No firm date, but general
expectation is early 2014
2009 2010 2011 2012 2013 2014
Moratorium Introduced April 2011
2012
Moratorium Lifted
Sept 2012
2013
Regulatory Framework anticipated
4Q13
Expected award of Exploration
Right
Falcon/Chevron deal announced Dec 2012
CEL Revised (larger)
application for Exploration Right
Submitted May 2010
CEL Application for Exploration
Right Submitted October 2008
2008
Falcon Technical Co-operation
Permit granted Oct 2009
Falcon application for Exploration
Right Submitted August 2010
Shell application for Exploration
Rights Submitted Dec 2010
Falcon Technical Co-operation
Permit granted Oct 2009
Shell Technical Co-operation
Permit granted 2009
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Agenda
!! Company Overview
!! Cranemere Project
!! South Africa – context
!! Summary & Conclusions
17
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South Africa – Economy under Pressure
18
!! Largest economy in Africa; high levels of unemployment and inequality are the key economic problems facing the country.
!! Official unemployment 25%, unofficial estimates ~40%, youth unemployment ~53%.
!! A quarter of South Africans live on less than US $1.25 a day, with limited access to economic opportunities and basic services.
!! Per capita GDP growth mediocre, growth 1.6% a year from 1994 to 2009, 2.2% pa 2000–09. First quarter 2013 figures show an annualized rate of 0.9%.
!! Crisis in power availability – insufficient capacity in power infrastructure led to rolling blackouts in 2007. Margin between demand and capacity still low, leaving the country vulnerable to further blackouts.
!! Econometrix (SA’s largest independent macro-economic consultancy) Report March 2012 concluded;
!! A 50 tcf shale resource could add R200bn to GDP pa and create 700,000 sustainable jobs; and
!! Could provide a solution to power supply challenges and ensure South Africa’s energy security
The government is strongly motivated to pursue potential shale gas resources as a catalyst to transform the economy.
!
!
Desktop estimates predict that the shale gas
cubic feet, which would make it the fifth largest shale gas field in the world.
In the summary table above, the production chain
value added and employment levels over the life of the project at compared to projected national economy
values in the year 2035.
Total upstream value added in s
3.3 times the size of the SA Mining sectorí s value added during 2010.
value added of R2142bn, equating to 9.3 times the value of mining GDP in 2010.
downstream value added in scenario A is equivalent to 8
while scenario B, produces estimates of G
Africa during 2010. All modelled calculations are at constant 2010 prices.
Test scenario A indicates total production chain employment at an average annual rate of just over 290
jobs, with scenario B resulting in average employment of
added and employment figures assume that no ga
downstream value adding purposes. The figures include direct and indirect and induced value creation and
employment.
Recent experiences with electricity supply and pricing developments have broug
Africans the inseparable relationship between usable energy and economic performance. The economy
simply cannot grow at any reasonable sustained rate without using additional energy resources.
A common assertion in South Africa is th
but the Rand price of coal has kept pace with the Rand price of crude oil very closely over the past three
decades. Nobody asserts that oil is cheap.
!"#$%&#'()*&$+*,$-)'.(*+/'0$1&")#
"#$%&'()*+,-$%&'()!.+)/0-'1!
"#$%&'()*+,-$%&'()!.+)/0-'1!
2'.&33&.$4"3(&$"..&.$"0.$5673'86&0+$
94&)":&$900("3$;"3(&$9..&.$%<0
94&)":&$900("3$5673'86&0+$
!
!
Key Conclusions
Desktop estimates predict that the shale gas of the Southern Karoo area could be a reserve of 4
cubic feet, which would make it the fifth largest shale gas field in the world.
In the summary table above, the production chain includes all upstream and downstream activities. Mean
added and employment levels over the life of the project at compared to projected national economy
Total upstream value added in scenario A (R760bn) during the 25 year production life of the resource is
SA Mining sectorí s value added during 2010. Resource
value added of R2142bn, equating to 9.3 times the value of mining GDP in 2010.
n scenario A is equivalent to 83.3% of the GDP of So
, produces estimates of GDP contribution equivalent to 208% of the entire GDP of South
Africa during 2010. All modelled calculations are at constant 2010 prices.
Test scenario A indicates total production chain employment at an average annual rate of just over 290
jobs, with scenario B resulting in average employment of just over 700 000 jobs.
added and employment figures assume that no gas is exported, and that all the gas extracted is used for
downstream value adding purposes. The figures include direct and indirect and induced value creation and
Recent experiences with electricity supply and pricing developments have broug
Africans the inseparable relationship between usable energy and economic performance. The economy
simply cannot grow at any reasonable sustained rate without using additional energy resources.
A common assertion in South Africa is that the country possesses abundant cheap coal. Abundant, yes,
but the Rand price of coal has kept pace with the Rand price of crude oil very closely over the past three
decades. Nobody asserts that oil is cheap.
=*&0")/'$9 =*&0")/'$>
!"#$%&#'()*&$+*,$ ?@-)'.(*+/'0$1&")# ?A
234353
44625672
2'.&33&.$4"3(&$"..&.$"0.$5673'86&0+$=*&0")/'#
94&)":&$900("3$;"3(&$9..&.$%<0
94&)":&$900("3$5673'86&0+$
89':;%0<'!=;))(&>!
of the Southern Karoo area could be a reserve of 485 trillion
includes all upstream and downstream activities. Mean
added and employment levels over the life of the project at compared to projected national economy
(R760bn) during the 25 year production life of the resource is
Resource Scenario B has upstream
value added of R2142bn, equating to 9.3 times the value of mining GDP in 2010. Combined upstream and
% of the GDP of South Africa during 2010,
% of the entire GDP of South
Test scenario A indicates total production chain employment at an average annual rate of just over 290 000
000 jobs. These synoptic value
s is exported, and that all the gas extracted is used for
downstream value adding purposes. The figures include direct and indirect and induced value creation and
Recent experiences with electricity supply and pricing developments have brought home to most South
Africans the inseparable relationship between usable energy and economic performance. The economy
simply cannot grow at any reasonable sustained rate without using additional energy resources.
at the country possesses abundant cheap coal. Abundant, yes,
but the Rand price of coal has kept pace with the Rand price of crude oil very closely over the past three
=*&0")/'$>
A@?A
5?@@463@
@444A7B3A
2'.&33&.$4"3(&$"..&.$"0.$5673'86&0+$
Source: Econometrix Report March 2012 For
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South Africa – Power Issues !! Significantly increased demand since 1994, ageing fleet, ~90% dependent on
coal, mine locations remote to demand = line losses, cheap coal reserves running low.
!! Typical available capacity ~30GW vs peak demand of ~36GW
!! Integrated Resource Plan (IRP) established in 2010 to develop a sustainable electricity strategy for next 20 years seeks to more than double current generation capacity to 89 GW by 2030
!! Huge new build programme - nuclear, coal, gas and renewables !! New build coal more expensive than existing (largely depreciated)
!! Gas advantaged against new coal, and renewables on a capex per MW installed basis.
!! Eskom – state owned power utility, dependent on massive Govt support !! Credit support and direct funding to Eskom ~16.9% of 2010 GDP
!! Coal provides base load, planned renewables to provide additional power during daytime hours, diesel peaking plants make up shortfall.
!! Natural gas the only base load technology that can follow the SA load curve – morning and evening peaks, ramped down overnight.
!! LNG import now under active consideration to bridge the gap and address the shortfall in feedstock for PetroSA’s gas-to-liquids plant at Mossel Bay.
19
!
!
"#$%%!&'#()!*#+!,$%-)./!
and trains running on compressed natural gas, which could displ
synthetic fuels.!!!
2 . 7 W a t er Const r a int s
South Africaí s water resources have
socio- economic benefits that such growth may be able to offer
imaginary line drawn between Rustenburg (in the North W estern Province) and Middelb
Mpumalanga Province) represents a dividing line, north of which expansion of industrial activity will be
limited by water constraints. More than 40 years after setting out this theory, he has been proven largely
correct by history.
The single most basic reason for the scarcity of water relative to the potential demand for it for various
economic and social applications is that South Africa is a low
falls over the 1.22 million square kilometres of the
precipitation over the course of several years, while the wettest areas may rec
average within the space of single years.
The first implication for electrical power generation is that opp
extremely limited by the lack of perennial water flows. A second implication is that, under the somewhat
elderly power station complex in the country, each kilogram of coal that is burnt uses 1.33kg of water to
generate electricity14. Newer coal burning technologies which include carbon dioxide extraction can
produce substantial water saving
possibility for planned new coal fired generation facil
Appendix E . The table below provides a summarised overview of the age profile of the existing power
station complex in South Africa, and the historic lack of fixed capital formation since the 1980í s p
some insight into levels of technology employed in the existing power generation base.
A g e g r oup
O ver 40 years
35- 45 years
25- 35 years
U nder 25 years
Total
The advanced age profile of E skomí s coal fired power stations is a significant contributor to the average
efficiency of this form of power generation in the country. The energy efficiency of the coal fired network is
at a low 21%. The 9.6Gw additional capac
are significantly higher, estimated at 40%.
Researching and refining the comparison of water usage for individual primary energy products and their
conversion to end- user friendly products is a task
E nergy Technology Innovation Policy Research Group, working under the auspices of
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!14 D a t a f r o m s l i de i n u nda t ed p r es ent a t i o n ( c i r c a l a t e M a r c h 2 010) b y D r . A nt h o ny T u r t o n, a v a i l a b l e o n
w w w . env i r o nm ent c o ns er v a t i o n. o r g . z a
! 0%1234)1/3#(!!5!6$37#$8!91)$:8!;)+%<$.)+!31!&=>=
!
and trains running on compressed natural gas, which could displace some of the demand for coal
South Africaí s water resources have been recognised as a potential constraint to economic growth and the
economic benefits that such growth may be able to offer. David H obart- H oughton theorised that an
imaginary line drawn between Rustenburg (in the North W estern Province) and Middelb
Mpumalanga Province) represents a dividing line, north of which expansion of industrial activity will be
limited by water constraints. More than 40 years after setting out this theory, he has been proven largely
ost basic reason for the scarcity of water relative to the potential demand for it for various
economic and social applications is that South Africa is a low rainfall country ñ on average, 4
million square kilometres of the country. Arid areas may receive virtually zero
precipitation over the course of several years, while the wettest areas may rec
average within the space of single years.
The first implication for electrical power generation is that opportunities for hydro
of perennial water flows. A second implication is that, under the somewhat
elderly power station complex in the country, each kilogram of coal that is burnt uses 1.33kg of water to
. Newer coal burning technologies which include carbon dioxide extraction can
produce substantial water savings, but are not a practical proposition for retro fitting. These become a
possibility for planned new coal fired generation facilities, but not for the old - as
below provides a summarised overview of the age profile of the existing power
station complex in South Africa, and the historic lack of fixed capital formation since the 1980í s p
some insight into levels of technology employed in the existing power generation base.
T a b le 4 : A g e D ist r ib ut ion of E sk om G W ca p a cit y % sh a r e
3.5 10.0
9 25.7
21 60.0
1.5 4.3
35 100
The advanced age profile of E skomí s coal fired power stations is a significant contributor to the average
efficiency of this form of power generation in the country. The energy efficiency of the coal fired network is
low 21%. The 9.6Gw additional capacity currently being constructed at the Medupi and Kusile plants
are significantly higher, estimated at 40%.
Researching and refining the comparison of water usage for individual primary energy products and their
user friendly products is a task of considerable complexity, and has been left to
E nergy Technology Innovation Policy Research Group, working under the auspices of
D a t a f r o m s l i de i n u nda t ed p r es ent a t i o n ( c i r c a l a t e M a r c h 2 010) b y D r . A nt h o ny T u r t o n, a v a i l a b l e o n
6$37#$8!91)$:8!;)+%<$.)+!31!&=>=!
6#:)!?!@A!!!!!!
ace some of the demand for coal- based
been recognised as a potential constraint to economic growth and the
H oughton theorised that an
imaginary line drawn between Rustenburg (in the North W estern Province) and Middelburg (in the
Mpumalanga Province) represents a dividing line, north of which expansion of industrial activity will be
limited by water constraints. More than 40 years after setting out this theory, he has been proven largely
ost basic reason for the scarcity of water relative to the potential demand for it for various
on average, 400mm of rain
country. Arid areas may receive virtually zero
precipitation over the course of several years, while the wettest areas may receive many times the
ortunities for hydroelectric power are
of perennial water flows. A second implication is that, under the somewhat
elderly power station complex in the country, each kilogram of coal that is burnt uses 1.33kg of water to
. Newer coal burning technologies which include carbon dioxide extraction can
, but are not a practical proposition for retro fitting. These become a
as discussed more fully in
below provides a summarised overview of the age profile of the existing power
station complex in South Africa, and the historic lack of fixed capital formation since the 1980í s provides
some insight into levels of technology employed in the existing power generation base.
% sh a r e
The advanced age profile of E skomí s coal fired power stations is a significant contributor to the average
efficiency of this form of power generation in the country. The energy efficiency of the coal fired network is
at the Medupi and Kusile plants
Researching and refining the comparison of water usage for individual primary energy products and their
of considerable complexity, and has been left to the
E nergy Technology Innovation Policy Research Group, working under the auspices of the H arvard
D a t a f r o m s l i de i n u nda t ed p r es ent a t i o n ( c i r c a l a t e M a r c h 2 010) b y D r . A nt h o ny T u r t o n, a v a i l a b l e o n
!
!
"#$%%!&'#()!*#+!,$%-)./!
ì T h i s i s a b a l a nc ed p l a n t h a t s eek s t o r es p o ns i b l y u s e ener g y s o u r c es a v a i l a b l e t o u s , i nc l u di ng g a s ,
b i o m a s s , nu c l ea r , c o a l a nd i m p o r t s . î
ener g y , 2 3 % nu c l ea r a nd 15 % c o a l w a s exp ec t ed b y 2 03 0. î
F ocussing as it does on the energy resource component of the electricity supply side; the mix of the
resources appears achievable. Debates have ensued about timing within the IRP, and which resources
may be substituted for others if certain major developments are delayed (e.g. the nuclear power plant
perhaps not being on stream by 2019).
South Africaí s neighbour, Botswana, has begun development of coal fired power stations close to the
South African border, situated on r
200 years supply at expanding consumption rates. The economy of Botswana has very little requirement
for the massive additional capacity that these developments could make available
intention must be to export power to South Africa, and probably nearby Z imbabwe as well.
Chart 1 below reflects a synthesis of available information relating to energy supply and demand over the
decade between 2009 and 2019, which woul
gas in the Karoo Gas. It is drawn from a number of private studies undertaken in the recent past by
E conometrix for players on both the demand and supply side of the electrical energy in South
!S o u r c e: E c o no m et r i x P t y L t d
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!8 N o t e t h a t t h i s i s new c a p a c i t y , p r es u m a b l y t o b e i ns t a l l ed b et w een 2 011 a nd 2 03 0. T h e p l a nned o v er a l l c a p a c i t y b y 2 03 0
o f t h e IR P f o r el ec t r i c i t y , a s p er t h e O c t o b er 2 010 r el ea s e b y t h e D O E i s s et o u t i n t h e a r t i c l e m a k i ng u p a p p endi x D o f t h i s
r ep o r t , a nd i nc l u des 4 8% f r o m c o a l , 14 % f r o m nu c l ea r , 16 % f r o m r enew a b l e ener g y s o u r c es a nd 9% f r o m o p en c y c l e g a s
t u r b i nes .
-27
47
-32
49
-39
02
-27
47
-32
49
-39
02
1 1
- 2 8 1 8- 3 2 3 7
- 2 9 5 7
- 3 6 8 3
- 4 5 7 3
- 2 7 4 7- 3 2 4 9
- 3 9 0 2
- 2 5 3 7
- 10000
- 8000
- 6000
- 4000
- 2000
0
2000
4000
6000
2 0 0 9 2 0 1 0 2 0 1 1
MW
E xisting installed and approved
Shortfall @ 2.5% gr
! 0%1234)1/3#(!!5!6$37#$8!91)$:8!;)+%<$.)+!31!&=>=
!
ì T h i s i s a b a l a nc ed p l a n t h a t s eek s t o r es p o ns i b l y u s e ener g y s o u r c es a v a i l a b l e t o u s , i nc l u di ng g a s ,
b i o m a s s , nu c l ea r , c o a l a nd i m p o r t s . î In t er m s o f t h i s p l a n, 8î new g ener a t i o n c a p a c i t y o f 4 2
c o a l w a s exp ec t ed b y 2 03 0. î
F ocussing as it does on the energy resource component of the electricity supply side; the mix of the
resources appears achievable. Debates have ensued about timing within the IRP, and which resources
r others if certain major developments are delayed (e.g. the nuclear power plant
perhaps not being on stream by 2019).
South Africaí s neighbour, Botswana, has begun development of coal fired power stations close to the
South African border, situated on rich coal fields which are estimated to equal the South African reserve of
200 years supply at expanding consumption rates. The economy of Botswana has very little requirement
for the massive additional capacity that these developments could make available
intention must be to export power to South Africa, and probably nearby Z imbabwe as well.
reflects a synthesis of available information relating to energy supply and demand over the
decade between 2009 and 2019, which would roughly correspond with the period of exploration for
Karoo Gas. It is drawn from a number of private studies undertaken in the recent past by
E conometrix for players on both the demand and supply side of the electrical energy in South
Ch a r t 1 : E lect r icit y S h or t f a ll
N o t e t h a t t h i s i s new c a p a c i t y , p r es u m a b l y t o b e i ns t a l l ed b et w een 2 011 a nd 2 03 0. T h e p l a nned o v er a l l c a p a c i t y b y 2 03 0
o f t h e IR P f o r el ec t r i c i t y , a s p er t h e O c t o b er 2 010 r el ea s e b y t h e D O E i s s et o u t i n t h e a r t i c l e m a k i ng u p a p p endi x D o f t h i s
d i nc l u des 4 8% f r o m c o a l , 14 % f r o m nu c l ea r , 16 % f r o m r enew a b l e ener g y s o u r c es a nd 9% f r o m o p en c y c l e g a s
-52
78
-53
10
-53
84
-54
48
-62
78
-64
33
-66
37
-52
78
-53
10
-53
84
-47
28
-48
38
-34
48
1 0 1 0 1 1 0
- 4 3 6 7 - 4 1 4 0 - 3 9 4 1
- 2 9 9 9 - 2 8 0 7
- 6 2 0 2- 6 5 0 3
- 6 8 6 2- 6 5 0 9
- 6 9 3 9
- 5 8 8 9
- 5 2 7 8 - 5 3 1 0 - 5 3 8 4
- 4 7 2 8 - 4 8 3 8
- 1 1 0 1
- 3 4 4 8
2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7
E xisting installed and approved F orecast Build 3.0% New major power stations
Shortfall @ 3.5% gr Shortfall @ 3.0% gr
6$37#$8!91)$:8!;)+%<$.)+!31!&=>=!
6#:)!?!@A!!!!!!
ì T h i s i s a b a l a nc ed p l a n t h a t s eek s t o r es p o ns i b l y u s e ener g y s o u r c es a v a i l a b l e t o u s , i nc l u di ng g a s ,
î new g ener a t i o n c a p a c i t y o f 4 2 % r enew a b l e
F ocussing as it does on the energy resource component of the electricity supply side; the mix of the
resources appears achievable. Debates have ensued about timing within the IRP, and which resources
r others if certain major developments are delayed (e.g. the nuclear power plant
South Africaí s neighbour, Botswana, has begun development of coal fired power stations close to the
ich coal fields which are estimated to equal the South African reserve of
200 years supply at expanding consumption rates. The economy of Botswana has very little requirement
for the massive additional capacity that these developments could make available, and the obvious
intention must be to export power to South Africa, and probably nearby Z imbabwe as well.
reflects a synthesis of available information relating to energy supply and demand over the
d roughly correspond with the period of exploration for shale
Karoo Gas. It is drawn from a number of private studies undertaken in the recent past by
E conometrix for players on both the demand and supply side of the electrical energy in South Africa.
N o t e t h a t t h i s i s new c a p a c i t y , p r es u m a b l y t o b e i ns t a l l ed b et w een 2 011 a nd 2 03 0. T h e p l a nned o v er a l l c a p a c i t y b y 2 03 0
o f t h e IR P f o r el ec t r i c i t y , a s p er t h e O c t o b er 2 010 r el ea s e b y t h e D O E i s s et o u t i n t h e a r t i c l e m a k i ng u p a p p endi x D o f t h i s
d i nc l u des 4 8% f r o m c o a l , 14 % f r o m nu c l ea r , 16 % f r o m r enew a b l e ener g y s o u r c es a nd 9% f r o m o p en c y c l e g a s
-66
37
-68
90
-79
14
-13
87
-20
0
17
61
1 2 0
- 4 1 8 7
- 3 3 8 0
- 1 8 2 1
- 1 3 8 7
1 2 9 3
2 8 3 0
5 1 5 7
- 3 4 4 8
- 2 0 0
1 7 6 1
2 0 1 8 2 0 1 9
New major power stations
Shortfall @ 3.0% gr
!
!
"#$%%!&'#()!*#+!,$%-)./!
the future of South Africaí s coal industry depends on the development of the W aterberg deposits, which
extend into Botswana.
Statistics SA publishes monthly data reflecting indexed values of mining production of various mineral
commodities, as well as monthly rand values of that mining production. This data is summarised in annual
format in the chart below. By dividing the Rand value data by the index of physical production, a unit price
index for coal may be calculated; this price index is express
Monthly Brent crude oil price data is kept in a database by E conometrix, as is the monthly average Rand
per U S Dollar exchange rate. Multiplying these together creates a Rand Crude O il price time series. This
series as well as the coal price series are set to a common base of 1980= 100, and the two resulting time
series are plotted together in the
Although the two price indices do diverge from each other for short periods, the overall level of correlation
is remarkably high (r= 0.966). As both are competing global primary energy resources, this is not
unexpected. O bviously, once capacity has been created that relies on one particular primary energy
source, it cannot easily be switched to another, and competition between sou
energy conversion network, rather than swopping from one resource to another using existing capacity.
The high degree of correlation of long
appreciated by the general public in SA, where the common belief appears to be that Rand coal prices
move less rapidly than Rand oil prices over time.
Ch a r t 6 : I nd ices of R a nd Coa l P r od uct ion P r ices a nd R a nd B r ent Cr ud e O il
This implies that capital investments reliant on particular fuel have to stay with those fuels, no matter how
fuel prices change over time. Because domestic coal prices are usually quoted in Z AR, the correlation
between those and crude oil prices is not widely appreciated by
continually refer to South African coal as being ì cheapî while crude oil is being described as ì expensiveî .
A further implication of this discussion is that potential gas availability is more likely to be absorbed by
0
500
1000
1500
2000
2500
3000
Index
Index: 1980=100
! 0%1234)1/3#(!!5!6$37#$8!91)$:8!;)+%<$.)+!31!&=>=
!
the future of South Africaí s coal industry depends on the development of the W aterberg deposits, which
Statistics SA publishes monthly data reflecting indexed values of mining production of various mineral
as monthly rand values of that mining production. This data is summarised in annual
. By dividing the Rand value data by the index of physical production, a unit price
index for coal may be calculated; this price index is expressed in Rand terms.
Monthly Brent crude oil price data is kept in a database by E conometrix, as is the monthly average Rand
per U S Dollar exchange rate. Multiplying these together creates a Rand Crude O il price time series. This
l price series are set to a common base of 1980= 100, and the two resulting time
the chart below.
Although the two price indices do diverge from each other for short periods, the overall level of correlation
h (r= 0.966). As both are competing global primary energy resources, this is not
unexpected. O bviously, once capacity has been created that relies on one particular primary energy
source, it cannot easily be switched to another, and competition between sources relies on expanding the
energy conversion network, rather than swopping from one resource to another using existing capacity.
The high degree of correlation of long- term coal and crude oil price movements in Rand terms is not widely
general public in SA, where the common belief appears to be that Rand coal prices
move less rapidly than Rand oil prices over time.
of R a nd Coa l P r od uct ion P r ices a nd R a nd B r ent Cr ud e O il
ital investments reliant on particular fuel have to stay with those fuels, no matter how
fuel prices change over time. Because domestic coal prices are usually quoted in Z AR, the correlation
between those and crude oil prices is not widely appreciated by local analysts and commentators, who
continually refer to South African coal as being ì cheapî while crude oil is being described as ì expensiveî .
A further implication of this discussion is that potential gas availability is more likely to be absorbed by
Coal price index Brent price index
Index: 1980=100
6$37#$8!91)$:8!;)+%<$.)+!31!&=>=!
6#:)!?!@A!!!!!!
the future of South Africaí s coal industry depends on the development of the W aterberg deposits, which
Statistics SA publishes monthly data reflecting indexed values of mining production of various mineral
as monthly rand values of that mining production. This data is summarised in annual
. By dividing the Rand value data by the index of physical production, a unit price
Monthly Brent crude oil price data is kept in a database by E conometrix, as is the monthly average Rand
per U S Dollar exchange rate. Multiplying these together creates a Rand Crude O il price time series. This
l price series are set to a common base of 1980= 100, and the two resulting time
Although the two price indices do diverge from each other for short periods, the overall level of correlation
h (r= 0.966). As both are competing global primary energy resources, this is not
unexpected. O bviously, once capacity has been created that relies on one particular primary energy
rces relies on expanding the
energy conversion network, rather than swopping from one resource to another using existing capacity.
term coal and crude oil price movements in Rand terms is not widely
general public in SA, where the common belief appears to be that Rand coal prices
of R a nd Coa l P r od uct ion P r ices a nd R a nd B r ent Cr ud e O il
!ital investments reliant on particular fuel have to stay with those fuels, no matter how
fuel prices change over time. Because domestic coal prices are usually quoted in Z AR, the correlation
local analysts and commentators, who
continually refer to South African coal as being ì cheapî while crude oil is being described as ì expensiveî .
A further implication of this discussion is that potential gas availability is more likely to be absorbed by
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Growing International Interest
20
!! Recent events in SA offshore acreage. Existing participants include Shell, BHPB, Gazprom, Tullow, Forest, Cairn.
!! In addition to shale gas, other onshore activity includes CBM ie Sunbird, Kinetiko, Molopo.
20Upstream - Offshore BlocksKey points Increasing Offshore activity with significant global interest
5/6 7
1
11B/12B
Cairn India�PetroSA farm-in agreement for
offshore Block 1
Anadarko and PetroSA agreement
for Exploration Rights over blocks 5/6 and 7
Canadian Natural Resources conversion of licence in blocks 11B/12B. Regulatory requirements complete� drilling targeted:
a
–Q4/13 - Q1/14–Q4/14 - Q1/15
9
June 2012�� Total application for exploration rights South of block 9.
Project Ikhwezi: PetroSA first gas expected 3Q 2013
...Offshore timeframes may in many cases be quicker than shale gas
...We list the recentevents, with existingoffshore investors also including Shelland Forest Oil...
There is increasinginvestor interest andactivity regardingoffshore SouthAfrican acreage…
ExxonMobil application for exploration rights 6E of Sasol
block RIIVKRUH E Coast
ExxonMobil DFTXLVLWLRQ RI�75%�SOXV�RSHUDWRUVKLS RI Impact’s Tugela South Exploration RighW
2A
Ibhubesi Gas Field�Sunbird acquiVLWLRQ�
RI 76% IURP�)RUUHVW; JV partner PetroSA holds 24%
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Shale Gas in South Africa !! Shale gas impact on US energy security and the economy widely acknowledged;
!! decreasing reliance on imports, revitalizing existing and creating new industries, stimulating growth, increasing employment and improving the balance of payments (IHS research US unconventional oil & gas supported 1.7 million jobs in 2012, forecast 3 million by 2020)
!! US Energy Information Administration (EIA) estimates shale gas potential ~370tcf risked technically recoverable (2013 update). !! Independent Econometrix Report analysis based on 25-50tcf economically recoverable - full extent will only be known post exploration, but
still transformational to SA’s energy balance at these levels.
!! Shale likely to play significant role in future iterations of the IRP with a drive to early gas fired power generation. !! Potential to spark a “Dash for Gas” such as that experienced by the UK which moved from gas fired power generation at 5% of installed
capacity in 1990 to 30% by 2002.
!! Existing synthetic fuels industry – coal and gas to liquids plants at Secunda and Mossel Bay. As conventional feedstock declines these could offer an export market for shale gas based on oil products rather than gas pricing.
21
Hypothetical Timeline for Shale and Market Development
!! Proposed LNG imports may further accelerate infrastructure development and act as a “bridge” to shale gas
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Well Head Power
Pipelines
GTL
CCGT Power
Upstream Exp & App Development & Production
Planning
Planning
Planning
Build
Build
Build
Build
Well Head Power Generation
Pipelines
CCGT Power Gen
GTL Feed
Source: Company view
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Shale Gas: Core to the National Debate
22
!"#$%&'"("%)"&*'+,!-.+/+,"0'$1!!"!#$%&'(!")*"!!!
-.+/+,$.&'"2+'03&4%'++&)5%("&6%)&#"7"(+2,"/0&.+8(#&9++)0&:;<&%/#&.'"%0"&58/#'"#)&+*&
05+8)%/#)&+*&=+9)&
!- !"#$%&'(%)*%$+,%-.%/01%,#$234$,5%678%$9*%:$;2<<2)=%9">29%*,,$?%#+4<,%;,#)";9,%9)"<5%455%@A''%>2<<2)=%$)%BCD%
4=="4<<E%4=5%9;,4$,%F''%'''%#"#$42=4><,%G)>#%%%
- H)"<5%I;)J25,%.1%K2$+%4%#)<"$2)=%$)%2$#%,<,9$;292$E%#"II<E%4=5%I;292=L%9+4<<,=L,#%%
- Development of gas could ensure South Africa’s energy s,9";2$E%%
%The shale gas opportunity in the Karoo could significantly boost South Africa’s economy and create hundreds of thousands of jobs. This is according to an economic report released by Econometrix, the country’s largest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“The possible economic impact of shale gas development in the Karoo is undeniable,” says Tony Twine, director and research team leader at Econometrix. “Developments, downstream and induced demand from 0'.!+,&21.!7.,.%$0.-!M>!7$4!8+,-4!%./%.4.,0+,7!2,6>!DL!$,-!*)L!28!0'.!454/.&0.-!%.4.%B.!&256-!7.,.%$0.!massive contributions to the country’s GDP and create many hundreds of thousands of jobs.”!
!
!
Future Energy Report Final February 2012
Report commissioned by Shell
9
Figure 3. Attitudes towards efforts to determine the presence of natural gas in the Karoo
If natural gas was proven to be present in the Karoo, the same proportion of people overall (73%)
would be in favour of gas extraction. However, the proportion of those who are strongly in favour
increases (from 39% to 45%), while the proportion of those in opposition decreases to 21%, with a
greater percentage now uncertain as to how they feel about the issue (6%).
Figure 4. Attitudes towards gas extraction in the Karoo if the presence of large quantities of gas is uncovered
!"#$
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Agenda
!! Company Overview
!! Cranemere Project
!! South Africa – context
!! Summary & Conclusions
23
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Challenger has a Bright Future
24
Company making base asset in Cranemere
1
Near term value catalyst 2
Enhanced organisational capability
3
Emerging strategy 4
"! Unique small cap access to a proven gas to surface shale
play in a global Top Ten basin "! EIA inferred GIP 32tcf, >7 tcf risked recoverable with
upside for Fort Brown shales "! Balance of play fairway under application by Shell, Falcon/
Chevron "! Permit award anticipated in coming months "! Advanced farm-in discussions
"! New management team – motivated via equity alignment "! Tight share register
"! Transform Challenger via value accretive organic and
inorganic opportunities
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Contact
25
Robert Willes – MD Challenger Energy Limited Mobile: +61 410 479 032 Email: [email protected] Web: www.challengerenergy.com.au
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