South Africa's Natural Gas Discovery: An Economic Impact Analysis

This essay examines the potential economic effects of the natural gas discovery off the coast of South Africa. It discusses the benefits, such as increased GDP, tax revenue, job creation in sectors like welding and engineering, and a more affordable energy source. The analysis also addresses unintended consequences like air pollution, negative impacts on biodiversity due to leaks and chemical use, and the potential for the resource curse leading to slow economic growth and inequality. The essay further suggests solutions, including environmental regulations and laws to protect ecosystems, controlling supply to manage prices, and exploring the economic value of exporting natural gas. This comprehensive overview highlights the multifaceted impact of natural gas discovery on South Africa's economy and environment. Desklib provides a platform for students to access similar solved assignments and study resources.

Running head: ECONOMICS
Economics
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ECONOMICS
Effects of discovery of natural gas in South Africa
Introduction
The natural gas acts as a natural bridge fuel between the fossil fuel of the present
situation and the renewable fossil fuel of tomorrow. Natural gas is known to provide
environmental benefit for the country. According to the reports of the French energy giant it
have been found out that there is a presence of large gas field in the coast of South Africa
which is termed as the “wet gas”.
Beneficial of natural gas found in South Africa
The natural gas which have been found in South Africa can be used as petrol at
PetroSA’s gas to the fuel refinery. The gas can either be converted to petrol or electricity.
Government will be also be earning more tax from the natural gas since oil is known to
represent more than fifteen percent of the imports of South Africa1. The reason behind this is
that drilling for oil is known to be highly capital intensive in nature. For investing in this
particular kind of industry, investors need certainty in legislation as well as in government
policy. It have been found out that more than 300 offshore wells have been drilled in South
Africa over the past years. In addition to that the oil companies will have to pay a royalty of
percent on the sales of all oil or gas produced in South Africa. The gross domestic product of
South Africa will also increase after the discovery of the natural gas.
The discovery of the natural gas in South Africa will lead to a huge boost to all kinds
of business in South Africa. Welders and electricians will also be in demand when they will
be producing both on the rigs as well as in onshore. Engineers who are experienced as well as
1 "Everything You Need To Know About South Africa's Massive Gas Find." Businessinsider.co.za. N.p., 2019.
Web. 10 Mar. 2019.

ECONOMICS
highly skilled in nature will also be in demand2. The other advantages are when the natural
gas will be converted into power, it can help in providing affordable as well as reliable source
of energy which will be boosting the manufacture in the country. For this reason the
employment rate will also increase
Uninted consequences and its solutions
The uninted consequences of the discovery of the natural gas is that it will be leading
to air pollution as it produces nitrogen oxides which lead to the formation of smog. The
exploration of the natural gas will also be having negative impacts on the biodiversity of the
affected areas3. The main problem that will arise are due to leakages of the crude oil and also
due to chemicals used in the processes of production. Fire production and leakages are
associated with the gas production. The discovery of natural gas can be thought as a curse for
most of the countries which is known to slow the economic growth rather than driving it. The
unexpected oil and gas discoveries known to act as new shocks which drives the business
cycle by driving foreign direct investment. The revenues from the natural resource had
known to be linked to slow economic growth, poverty as was inequality in countries. The
resource revenue can also increase the exchange rate of the currency thereby hurting
competitiveness in the non resource sectors. Even though abundance of oil discovery can lead
to high growth, it will be benefitting only few people rather than translating into high living
standards for most of the population. The countries should also be passing various
environmental laws for preserving natural ecosystem. The government should be imposing
various regulations for protecting the environment. When the supply will be more than
2 Iodice, Paolo, et al. "Energy, economic and environmental performance appraisal of a trigeneration power
plant for a new district: Advantages of using a renewable fuel." Applied Thermal Engineering 95 (2016): 330-
338.
3 The Conversation. (2019). What a major offshore gas find means for South Africa's energy future. [online]
Available at: http://theconversation.com/what-a-major-offshore-gas-find-means-for-south-africas-energy-future-
111503 [Accessed 10 Mar. 2019].

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demand, the only way to raise the price is reducing the supply4. There is also an economic
value for exporting the products as exporting natural gas are known to have huge benefits.
4 Davis, Solomon. "The Importance of Government Regulation." SWOSU Sayre Student Anthology 1.7 (2019):
22.

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Reference list and bibliography
"Everything You Need To Know About South Africa's Massive Gas Find."
Businessinsider.co.za. N.p., 2019. Web. 10 Mar. 2019.
Davis, Solomon. "The Importance of Government Regulation." SWOSU Sayre Student
Anthology 1.7 (2019): 22.
Iodice, Paolo, et al. "Energy, economic and environmental performance appraisal of a
trigeneration power plant for a new district: Advantages of using a renewable fuel." Applied
Thermal Engineering 95 (2016): 330-338.
The Conversation. (2019). What a major offshore gas find means for South Africa's energy
future. [online] Available at: http://theconversation.com/what-a-major-offshore-gas-find-
means-for-south-africas-energy-future-111503 [Accessed 10 Mar. 2019].