IEA: SA one of “most dynamic countries” in developing shale gas reserves

There were a couple of surprises during this interview on CNBC Africa Power Lunch today with Fatih Birol, chief economist of the International Energy Agency. For one, he says having worked closely with the Government on the project, the IEA believes South Africa is moving more rapidly than most countries in developing its potentially huge shale gas resources. For another, despite this cheap and potentially huge natural resource, he is totally supportive of the Government's controversial nuclear ambitions. After all the emotion that has been clouding the facts, it's good to hear a sober international assessment of the national energy dilemma. – AH  

ALEC HOGG: The International Energy Agency's World Energy Outlook Special Report found that action in the energy sector could unleash an extra decade of growth. A big focus of this report was Africa, and joining us on the line is the IEA Chief Economist, Fatih Birol. Fatih, being CNBC Africa, our obvious question is why, with all these wonderful natural resources, does the continent still have such a big energy deficit?

FATIH BIROL: Africa has huge resources. Not only oil, gas, and coal but also huge, renewable energy resources such as hydropower and solar power. No other continent is more solar-powered than Africa. At the same time, today about 620-million people in Africa have no electricity. The missing link between huge resources and the African citizens' lack of access is investment. We need to find out how we can mobilise the investment for the domestic energy services in Africa. Hence, this is the report we made. We made some suggestions to African governments. Actually, let's just say Africa and beyond.

ALEC HOGG: Fatih, I'd like to bring you specifically to what's going on in South Africa right now. We have shale gas, huge reserves as your IEA has documented and yet, this country is engaging in a massive nuclear energy proposal. Is that one of the suggestions that you put to them?

FATIH BIROL: When I compare South Africa to many other countries in the region and maybe, developing countries in the world, South Africa is one of the most dynamic countries – looking at the energy sector from a diverse perspective. Today, coal is dominating the energy mix in South Africa, but we see strong efforts from Government in order to push the renewables – very large schemes. At the same time, nuclear power firstly, have to reduce the share of coal and as you mentioned, if the shale gas becomes available for domestic use it will reduce the share of coal and reduce the carbon footprint of the energy sector in Africa.

ALEC HOGG: But surely, when you are talking about the energy mix, you would be going for the best opportunity – using your natural resources. We have uranium, but uranium is small and can be transported everywhere. Shouldn't South Africa be focusing its attention on those natural resources that it has?

FATIH BIROL: Of course, and it is what the country is doing. Coal is used. Renewables, which are widely available in South Africa, are being exploited under shale gas. We work very closely with the South African Government in order to produce shale gas in a sustainable and cost-effective way. At the same time, the inclusion of nuclear power in the South African way would also reduce the issue of coal and at the same time, free up some of domestic resources for export, which could bring handsome revenues to the country.

ALEC HOGG: So it is a balance, clearly. Fatih, sitting in this country we do get a little frustrated – looking at what's happening with shale gas in the United States – that it's taking so long for South Africa to get its act together on these potentially exciting resources. Are we slow, in a global context?

FATIH BIROL: No, I think South Africa is one of the most dynamic countries as far as shale gas development is concerned. Of course, it would be unfair to compare it to the United States because the U.S. has several decades of experience in terms of the oil and gas sector. For example, when I compare South Africa to some European countries who have shale gas resources or with some other Asian countries, South Africa is making significant advancements. To be fair to you, one shouldn't expect that tomorrow, shale gas will change the entire energy game in South Africa. This will be a gradual process and the contribution from shale gas will be somehow limited, but still important for the country.

ALEC HOGG: Well, in time I guess, it could be a game changer (we hope). From a broader perspective Fatih, we heard yesterday on this program that Nigeria is no longer going to be selling any oil into the United States – the United States ending its exports from Nigeria. We know that Africa depends hugely on its exports of oil and with the oil price coming under a lot of pressure as well, is this not perhaps triggering some different decisions that have to be made on the continent?

FATIH BIROL: Firstly, as far as Nigeria is concerned… Again, they have huge resources, significant challenges, many uncertainties, oil tax and measure issues, as well as a lack of rule of law in certain cases. This is definitely not good news for the electricity and the increase in production. Our analyses show that in period of time, Angola (in terms of crude oil production) may overtake Nigeria. Having said that, what is happening today in the United States? Lots of shale oil, which is more or less the same quality as the Nigerian oil may mean that the Nigerian (or the many other sub-Saharan African countries) exports may now, slowly but surely, be changing direction for trade… Moving from the Atlantic basin to the Asia Pacific basin, to countries in Asia and we may well see the change of direction of trade. Of course, you talk about oil, but then comes the natural gas.

There are substantial prospects for natural gas in the region. In addition to Nigeria and Angola, new players are coming, such as Mozambique and Tanzania. Our report, Africa Outlook, highlights that sub-Saharan Africa emerges as a new, global gas player sometime, very soon, mainly as a result of exports but at the same time, using a lot of gas for powering the economy.

ALEC HOGG: It looks quite promising when you take it as an overall situation. That was the Chief Economist of the International Energy Agency, Fatih Birol. The report that was released by the IEA was only out yesterday, and was very focused as well, on Africa.