Shell battles to keep exploration right

British multinational energy major Shell and its local partner Impact Africa have lashed out at environmental groups that interdicted oil and gas exploration on the Wild Coast, accusing the pressure groups of wanting to “sterilise” all oil and gas exploration activity.

Shell and Impact will plead their case before the Constitutional Court in a bid to keep their exploration right, a project in which they had already invested more than R1bn before it was interdicted by the high court in Makhanda four years ago.

In its court papers seen by Business Day, Shell tells the apex court that the high court finding that the exploration right to conduct seismic surveys was granted unlawfully hurt investment in the sector.

“The evidence shows that there are potentially many benefits to SA in the type of investment which Shell has made in this matter,” the papers read.

“The high court’s judgment has the potential to have a chilling effect on investment. Shell does not ask this court to make a positive finding that the ultimate exploitation of the information found in the seismic survey (if any) will benefit the country,” it says.

“It merely seeks the opportunity to preserve its investment and use lawful means to persuade the minister (and potentially the community NPC applicants) that the benefits of any future project outweigh the perceived downsides.”

The high court decision, penned by Eastern Cape judge president Selby Mbenenge, found that exploration rights were granted unlawfully because there was no consultation with affected communities.

Mbenenge further found that authorities did not take into consideration the potential harm to the fishers’ livelihoods, among other considerations, when granting the exploration licence more than a decade ago.

A year ago, the Supreme Court of Appeal (SCA) dismissed Shell, Impact and the government’s appeal against Mbenenge’s judgment.

However, the SCA suspended the setting aside of the exploration right until Shell’s final renewal application on the right is finalised, leaving all parties unhappy for different reasons.

The environmental groups are unhappy that the SCA ruled that a further public participation process be conducted to cure the identified defects in the process already undertaken.

The activist groups, Sustaining the Wild Coast NPC, All Rise Attorneys for Climate and the Environment, Natural Justice and Greenpeace Africa in their papers before the Constitutional Court say the consultation process was inadequate on a range of grounds.

This included that the language used was technical and inaccessible, and “perhaps most critically, that the notices of consultation were published (in English and Afrikaans only) in newspapers that were inaccessible to many members of the critically affected respondent communities who speak isiXhosa or isiMpondo”.

The environment groups will argue that the SCA’s attempt to graft a consultation process on to a renewal application does not provide an effective remedy to the communities and other parties whose rights were infringed.

“The mere fact that a company spends money in pursuit of a right that it was granted unlawfully as a result of its own constitutionally inadequate consultation process does not constitute a reason to entirely undermine the effectiveness of the constitutional remedy obtained by the applicants,” reads the papers.

“Any prejudice to Impact and Shell and the state as a result of their straightforward setting aside order is a direct consequence of their unlawful acts,” they said.

“Yet, despite the applicant communities, Natural Justice and Greenpeace Africa being entirely blameless in the matter, the SCA made an order undermining the constitutional effectiveness of the relief these applicants sought and obtained.”

Impact in its papers lets loose on the intentions of the environmental groups for challenging the exploration right, accusing them of wishing to sterilise the potential use of SA’s oil and gas resources.

“That was the result they effectively achieved in the high court — a result which was overturned by the SCA, but which they now seek to reinstate by an appeal to this court,” Impact said.

“Worse still is the position adopted by Natural Justice — they do not act for the persons who were not consulted (Sustaining the Wild Coast act for this group). However, Natural Justice now opportunistically embraces the lack of consultation to achieve their objective — the sterilisation of the project and all oil and gas exploration.”

One of the big arguments pushed by Shell and Impact is that there is room to rectify the flawed public consultation process without nullifying their exploration right.

Impact said the eight-year delay in bringing the application should not have been condoned by the high court. It said considerable resources went into funding exploration activities during that time.

The exploration right was awarded in 2014, while the review application by environmental groups was launched in 2021.

Shell last year announced it was disinvesting from its downstream business in SA, which houses about 600 forecourts, making its upstream business all the more important to its presence in the country.

Oil and gas exploration projects in SA have been often met by legal challenges with lack of adequate public consultation often the burning issue.

The Western Cape High Court earlier this year dealt a blow to government efforts to explore for gas offshore from Mossel Bay, setting aside the granting of an environmental authorisation to TotalEnergies for offshore oil and gas exploration activities, remitting the matter back to the department.

The court found the French oil and gas giant’s environmental impact report was flawed, did not properly consider the economic risk of oil spills, failed to consider climate change and lacked proper public participation.

khumalok@businesslive.co.za