Petroleum Agency of South Africa on outstanding issues on their 2009 Annual Report & on Shale, Department of Mineral Resources, Mining Qualification Authority and Mine Health & Safety Inspectorate on their Annual Reports 2009

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Mineral Resources and Energy

22 March 2011
Chairperson: Mr F Gona (ANC)
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Meeting Summary

The Petroleum Agency of South Africa (PASA) returned to answer questions remaining from the 16 March 2011 meeting. The practice of hydraulic fracturing (fracking) was explained. A presentation was made on the potential of shale gas in South Africa. Application processes for mining rights applications were clarified. Members discussed the procedures and how the rights were allocated. The process was a mixture of first come first serve and a bidding process. The latter was applied to areas where there was high interest. Invitation to bid was a form of controlling demand and preserving the area in terms of the environment. The chief concern for all mining activities was the use of water which was already scarce in South Africa.

The Department of Mineral Resources’ Mine Health and Safety Inspectorate and the Mining Qualifications Authority presented their 2009/10 Annual Reports to the satisfaction of the Committee which adopted both reports.

Meeting report

The Chairperson welcomed the Members and the various entities present and invited everyone to introduce themselves.

Petroleum Agency of South Africa (PASA). Briefing
Ms Lindiwe Mekwe, General Manager: Regulation, Petroleum Agency of South Africa (PASA) delivered the presentation on the regulatory framework for the Agency. The processing of applications for upstream petroleum licences came from the Mineral and Petroleum Resources Development Act 2002.  Legal requirements for application took into consideration all laws applicable to South Africa, including property laws. Technical ability focused on what the applicant had to be able to perform using the appropriate technology. PASA would ensure that all laws were followed and adhered to at all times by making sure that it was provided with reports. PASA also worked to ensure that terms and conditions were adhered to at all times and that the Agency carried out various inspections in relation to environmental requirements. It was important to ensure that all necessary inspections were carried out and that environmental impact assessments (EIAs) had been done. PASA consulted with the Department of Water Affairs to ensure that the applicant fulfilled the requirements of the National Environmental Management Act 1998, the Integrated Coastal Management Act 2008 or any relevant environmental legislation. In the evaluation of applications, it was important to ensure that water source, water use, and waste water management standards were met by the applicant. The applicant company had to submit a plan for management of the environment, indicate from where it would source water for its operation and how it planned to dispose of any waste water.

Other legislation included the Health and Safety Act 1993 which required the applicant to provide a plan on how it would go about protecting the health and ensure the safety of its employees and how it would manage it. Rights were only issued once the applicant had fulfilled all the necessary requirements. Recommendations that went to the Minister included all the information on how the applicant had fulfilled necessary requirements. To ensure rights holders’ compliance with the Black Economic Empowerment (BEE) Charter, progress reports were required to be submitted twice a year. The Agency conducted site visits to verify the credibility of reports.

Mr Mthozami Xiphu, Chief Executive Officer (CEO), PASA, responded to questions raised by Members on 16 March 2011. On the question of the necessity for a licensing round and moratorium, he said that the
application was conducted through the Mineral and Petroleum Resources Development Act 2002. The Minister might invite applications for exploration and production rights and might specify in such notice the period within which the licensing round would take place. The invitation for applications was provided in Section 71. The general practice had been the first come first served method. Then it became necessary to have an orderly process to preserve the acreage, in the form of a moratorium in order to have governance in the area. To regulate the area with many applications a licensing round would be conducted, which meant, application through the Minister.

The other question raised was about the bias in procedure. The primary criteria for consideration were technical capacity, financial resources, ability to preserve the integrity of the environment and rehabilitate where there would be resultant degradation. The Agency saw its responsibility as ensuring a balance between the environment and development.

The Chairperson said that the issue of applications had been discussed intensively the week before and asked if there were time frames for processing applications.

Mr Xiphu assumed that the application being referred to was the Shell application and confirmed that Shell was not the only applicant being considered. There were others such as Falcon Oil, but Shell was a prominent one. Acceptance of an application meant that the applicant was given 120 days to return to the Agency with a plan on how the applicant would deal with the environment. If this plan was approved, then rights would be granted. The procedure applied to all applicants.

Petroleum Agency of South Africa (PASA). Briefing (continued)
Mr Stephen Mills, Technical Compliance Manager, PASA, continued the presentation. He referred to the question asked the previous week about process of hydraulic fracturing or fracking. He explained the procedure taken before consideration of fracking. Explorers usually did their desk top study, then proceeded to remote sensing and ultimately to the acid test. Assuming the exploration project was successful, they then moved to production. After ten or twenty or thirty years of production the area would go through the abandonment phase. The summary of the procedure was, first the desktop studies, second, remote sensing to build up the picture of what was beneath the surface, third, low impact surface techniques, fourth, seismic surveys to look at the subsurface structure, rock properties and hydrocarbon presence or absence, and finally, drilling to discover whether the gamble was successful or not. All the work done before would be conducted as accurately as possible to avoid failure. A geologist was usually present during the drilling process. Once the drilling was completed, a series of electrical tools would run down the bottom to measure gamma ray activity, rock density and other components. If that was successful, then there would be a need to confirm whether oil or gas was down there. Hence hydraulic fraction would then be conducted to stimulate flow. Hydraulic fracturing was just one method used to increase the flow of gas or oil out of the well. It was not a process unique to the Shell Company but was used across the industry and was also a technology used in South Africa since the 1960s. The next phase would be production using the same technology intensively over a small area. During the abandonment phase, the equipment would be removed then the well would then be sealed with concrete to prevent hydrocarbon escaping into the atmosphere. Then the safety and environment rehabilitation of the area would continue.

Ms N Mathibela (ANC) asked if South Africa had enough oil so that it did not need to rely on other countries. She inquired about the gold mines as the acid water was coming out of them.  

Mr H Schmidt (DA) asked if other companies submitted their applications at the same time as Shell and if they also used hydraulic fracturing to stimulate flow.

Mr R Sonto (ANC) remarked that there was an issue with monitoring as there was a lot of ducking and diving by right holders. They would keep on exploring without giving any reports about exploration, then they would say there was nothing, meanwhile a lot had been taken out of the well. He asked if there had been transgressions of such nature and who the transgressors were. He asked about the strictest measures, meted out to right holders who refused to comply, because he was aware that there was a lot of non-compliance and either the Department of Mineral Resources (DMR) or the Regulator were not applying stringent measures.

Ms N Mdaka (ANC) asked Ms Mekwe who delivered the first presentation about the poverty alleviation projects that had been completed and if she could elaborate on them and time frame for their implementation.
Mr Xiphu replied that South Africa did have a lot of oil and gas being produced in the South Coast though there was a lot of speculation and lot of possibilities but proof needed to be established which required research and drilling. PASA was reluctant to get into the discussion of acid mining drainage as it had not encountered such a problem. He referred the Member to the Task Team set up by Government to deal with the issue.

Mr Xiphu said the applications received were over the period of six to nine months, not days or weeks, and not all of them were at the same stage. Falcon was first and was nearing conclusion.  Shell and Suid Afrikaanse Steenkool en Olie (SASOL) had also applied. Such applications would be spread out. For Shell Gas, all would depend on hydraulic fracturing as it used that technology. There was no any alternative for shell exploration and, if it was unacceptable, then it needed to be considered. The Agency had received over 220 applications since the implementation of the Act.

Most applicants were up to date with their reporting and the Agency generally had good relationships with them.  

Poverty alleviation projects employed residents of the area to construct a particular pavement, and there was also the cleaning programme done in consultation with the municipalities. Remaining projects were extensions of the afforestation programmes around the country. Three projects would be completed by the end of the financial year.

The Chairperson asked about the legislative framework mechanisms for appeal from applicants. For shale gas, there were members of communities that felt that such an area should not be explored. Had PASA such procedures? An important subject was the seismic study conducted. For the Committee it was the major contributing factor. Any investigations yielding results most welcome.

Ms Mekwe replied that the legislation had provisions for the applicant to appeal if the process was not right. The law provided for the applicant to appeal the decision. In relation to affected parties, landowners had issues, and the law also provided for the relevant process to take place. Land owners could launch an objection.

Mr S Njikelana (ANC) asked if procurement was a tender process or was it first come first served or a combination.

Mr Mills explained that the seismic survey discussed was not about triggering seismic events like earthquakes but a high intensity pressure wave that travelled through rocks the same way an earthquake did.

Mr Xiphu said that procurements used both methods. The general method was to allow for people to identify any area that their analysis told them was a prospective area. They could apply on a first come first serve basis otherwise known as the open door system. In the event that there was a huge interest in one particular area of the country, Section 71 (1) of the Act would be applied to reserve that area and not open it up to first come first serve, but through bids. A notice would go out from the Minister, stating the day when the bids shall be submitted for which areas.

Petroleum Agency of South Africa (PASA) Briefing: Shale Gas
Ms Jennifer Marot, Geology Manager, PASA, presented the facts about shale gas, based on research, and interaction with international experts in various fields including the global shale gas initiative from the United States. She covered conventional versus unconventional occurrences of shale gas, exploration methods used, global experience and issues of this resource, and reviewed the history. Shale gas was hydrocarbon gas from shale, which was made up of pressed clay and silt. Gas did not flow out easily hence special technology would be required. Conventional means involved small volumes and unconventional ones included large volumes. SA had subsurface shale that needed horizontal drilling for unconventional methods. Stimulating methods needed included matrix acidizing to improve the permeability of the reservoir. South Africa only started shale gas exploration in 2010. Whatever the future would be, there was a need to understand and research the nature of this resource so that South Africa could be empowered and be in position to make the best decisions. The Agency was presenting the outcome of its own research so that by the time applicants applied the Agency would be informed.

Ms Mathibela asked about the unconventional method if it was going through coal. She also asked about the mention of cheap electricity. If it was cheap, for whom?

Mr S Motau (DA) said that there was a big problem of lack of water. If South Africa did not have water, then what would be the next step to find water?

Mr Schmidt asked how often a particular well was fracked, and if a horizontal well needed to be fracked more. He asked what effect shale gas would have on the South Africa shale gas mix.

Mr K Zondi (IFP) asked how the process might affect humans and animals.

Mr J Selau (ANC) referred to the mention of lack of pipelines and asked if more pipelines would be built.

Mr Njikelana asked the Agency if it produce a comparison of costs and asked to what extent this cleaner energy would be accessible and affordable.

The Chairperson asked about radioactivity and the possibility of combustion happening leading to disasters that might affect workers and communities. He asked about the kind of occupational diseases caused in the process of extracting such a resource.

The Chairperson asked about the job creation potential of the resource and what were the assurances that the benefit from the resource would flow directly to the people.

Ms Marot replied that shale was an unconventional resource and it was present in the coal. Methane was released when coal was mined but it could be removed.  Cheap electricity was a statement referring to the potential of the resource to produce cheap electricity. Shale did contain radioactive material but it was not considered an environmental risk.

Mr Xiphu noted that water was a problem that needed to be addressed.
Mr Mills explained that repeated fracking was a recent development and involved the ability to fracture several different points consecutively in a short period of time in the initial completion of well.

Mr Xiphu said that the Department of Energy had been in contact with the Agency to explain what kind of energy could come from resources to be included in the Integrated Environmental Management Plan (IEP). An estimate of unconventional resources was given of what South Africa could obtain onshore.

The pipeline infrastructure would depend on where the resource was found as the Agency was looking at huge areas and it would be difficult to comment on new infrastructure to be put in place.

Ms Mekwe explained that applicants were expected to give mitigation factors in relation to occupational diseases. Financial provision was also secured from the applicant so that in the event that they did not comply, liability would not lie with the State.

The National Environmental Management Act 1998 required the applicants to comply with requirements to ensure benefits were passed onto people and also to engage them in training.

The Chairperson concluded that PASA had answered all the questions the Committee had asked the week before. He thanked the Agency for their engagement with the Committee. He asked for a motion from the floor to adopt the report.

Ms Mathibela moved for the report to be adopted. This was seconded by Ms F Bikani (ANC).

Mine Health and Safety Inspectorate. Annual Report 2009/10. Briefing
Mr David Msiza, Acting Chief Inspector of Mines, Department of Mineral Resources, presented a summary of the Inspectorate’s Annual Report for 2009/10. The Inspectorate’s objective was to reduce mining related deaths. Some highlights include the increase in platinum miners and a slight decrease in gold miners as they moved towards the platinum industry.  Coal miners remained constant. People new to the mining industry presented the highest health and safety risk and therefore had a higher number of accidents. The Chinese was said to be planning to invest about R6 billion into the sector boosting job creation. Some of mines were going deeper increasing health and safety issues as there might be challenges of heat and seismic activity. Challenges foreseen include mines not having health and safety management systems and the Agency’s drive was to ensure they would. In terms of occupational health, health issues differed from safety issues due to latency. Asbestos, which was not used anymore, was responsible for some of the cases, and this proved the latency of health issues. Quite a number of people were killed by respiratory diseases and the number was four times higher than those killed in accidents. Most diseases related to pulmonary related tuberculosis (TB) from mining even though there was decrease noted in coal mines of such cases and an increase in noise-related cases. Achievements included meeting with stakeholders as the most important enforcement approach was to share information with, about health and safety. Meetings were held with the mine management to share findings and discuss problems and find solutions. Best practices were also discussed and considered in the quest for improvement. Challenges included the lack of capacity in terms of skills and expertise.

Ms Mathibela asked why the Inspectorate did not look at the housing challenges of the miners as this was one of the factors responsible for the rise in TB as people were crammed into small spaces. She was also concerned about the role the contractors were playing in the accidents that happened. She cited an incident in Rustenburg where the contractor did not take responsibility for a falling rock.  

Mr Selau asked about the status of accidents in open cast mines, how many of the trainees who did courses passed and how many failed, how many of those who died in accidents were foreigners and how many were South Africans.

Mr Schmidt asked if the extraordinarily high figure for pulmonary TB due to HIV/AIDs included contractors and if the figures reflected the number of employees affected or only those reported.

Ms Bikani asked if it was not possible to separate the number of TB cases from the HIV related cases. She asked about the status of the hospitals. She also queried the different types of training and requested the Department to make its Human Resource Development Plan available to the Committee.  

Mr Msiza replied that he was aware of that training and training needs was a very important matter to the Department. Due to the lack of the skills, it was very common to loose a high number of inspectors as the mines also sought them. The housing question was dealt with by the Department of Health which was moving people from hostels to family units and the Agency had plans to make sure living conditions were adequate. Contractors sometimes had expertise that miners lacked. The Health and Safety system also applied to them. Figures presented did include the contractors. Open cast mines did not have serious accidents as most of them occurred underground. The number of South Africans versus foreigners involved in accidents would have to be given to the Committee later. Splitting the figures of cases between TB and HIV/AIDs was a challenge but it would be explored. The Department had processes for identifying internal needs and it worked together with the Mining Qualifications Authority (MQA) in training the inspectors.

The Chairperson thanked the Department for its presentation and said that the Committee was satisfied with the report.

Mr E Marais (DA) moved for the adoption of the report. Ms Bikani seconded.  

Mining Qualifications Authority Annual Report 2009-2010. Briefing
Mr David Msiza, Chairperson, Mining Qualifications Authority (MQA) introduced his colleagues. He informed the Committee that the MQA had considered the new economic growth path plan and had discussions with the Department of Higher Education and Training. He said that the Authority’s CEO and Chief Operations Officer (COO) were only recently appointed.

Mr Yunus Omar, Chief Financial Officer, MQA, presented the financial part of the report. The Authority was established through the Mine Health and Safety Act 1996 and the South African Qualifications Authority Act 1995.

MQA aimed to transform the sector through skills development, health and safety training and development, and to develop the current workforce and new entrants to the labour market, reskill the employed /unemployed for sustainable employment, and deliver quality training and development. The bulk of the people were employed in the North West. The MQA had a deficit of 40 million. It had reserves in the beginning of the year which covered the operational costs. It had an unqualified audit report. Ninety percent of the money received was paid out as mandatory grants.

Ms Jay Moodley, Quality Assurance Manager, MQA, reported on the implementation of the strategy in the MQA. The Authority had a simple value chain to ensure the strategic objectives were realized. At the initial stage of the process the research department identified the specific skills needs in the sector and established scarce and critical needs.

The MQA, elaborated on the challenges in relation to strategic objectives. Accidents in mines remained a concern. Income decreased in past financial year, resulting in a reduction of learners, and a re-evaluation of some projects was necessary. There was also high staff turnover. In going forward the Authority had re-established itself as a Sector Education and Training Authority (SETA) forging ahead with confidence. It would implement the National Skills Development Strategy (NSDS3) and support skills development in terms of the Mining Charter.

Mr C Gololo (ANC) said that the numbers presented by the CFO did not tally as the Department had presented different figures. He asked for clarity. He asked why other areas such as Mpumalanga were well covered and other areas not. He asked if BEE Companies which wanted to venture into mining had to apply to the MQA to be able to participate in the industry.

Ms Bikani asked about opportunities offered by the MQA that could be promoted in the constituencies as there were miners in rural areas waiting for opportunities. She also asked if the gap of not having mining courses in universities close to mining areas had been closed. She asked if Committee members could be invited to functions. She was satisfied with the report.

MQA explained the differences in numbers.

Ms Moodley said that if a BEE company registered, there was an allocation process through a SETA. The Authority was considering partnerships with Further Education and Training (FET) Colleges for the development of artisans.  

The Chairperson thanked the MQA for its presentation and asked for a Member to move for the adoption of the report. Ms Bikani moved for the adoption of the report, and the motion was seconded by Mr Marais.

The meeting was adjourned.

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