-- South Africa lifts ban on shale gas exploration
-- Will reveal next week how that ban will be lifted
-- Companies say gas production still many years away
(Adds company and analyst comment.)
By Devon Maylie and Alexis Flynn
JOHANNESBURG--South Africa has lifted a temporary halt on
shale-gas exploration in an isolated, nature-rich region, the
government said Friday, but any production is still many years
away.
South Africa, estimated to hold the world's fifth-largest
reserves of shale gas, last year imposed a moratorium on hydraulic
fracturing--a procedure known as fracking--while it took a closer
look at the repercussions of letting companies like Royal Dutch
Shell PLC (RDSB) use the controversial technique in the Karoo, an
arid region home to a variety of desert mammals and plant
species.
Strident opposition from environmental groups and the local
community led to South Africa stopping exploration activity in the
area. They fear that fracking, which involves blasting water mixed
with sand and chemicals underground to free hydrocarbons trapped in
rock, could damage aquifers in the Karoo, harming the fragile
ecosystem and threatening agriculture.
In a statement, the government said cabinet had endorsed the
Department of Mineral Resource's recommendation that the ban be
lifted but gave little more detail, leaving companies and
opposition to wonder exactly what it means.
The mineral department said it will release more details next
week on how the moratorium will be lifted for processing licenses
and will also hold a series of public consultations with companies
and those who will be affected by the gas exploration. Minister
Susan Shabangu will first present to parliament before making the
details public.
Minister for the presidency, Collins Chabane, told a briefing
that approval of licenses will take into account a buffer zone for
a new $1.87 billion telescope that South Africa won the rights to
host in May.
South Africa's government is keen to develop the country's
nascent energy sector, which it believes will create jobs and
stimulate growth by cutting local fuel costs. Dependent on oil
imports to power its economy, South Africa suffers frequent
electricity shortages.
However, if estimates by the U.S. Energy Information
Administration are correct, the country holds around 485 trillion
cubic feet of shale gas resources, which would give it around 7% of
the global total.
Along with Shell, Falcon Oil & Gas Ltd. and Bundu Oil &
Gas (Pty.) Ltd., a South African company that teamed up with
Australia's Challenger Energy Ltd., (CEL.AU) also have applied for
exploration licenses.
Shell, which in 2011 applied to drill 24 wells in a 90,000
square kilometer area of the Karoo, welcomed the decision to lift
the ban.
"The Karoo Basin offers a potential exploration opportunity for
shale gas, which we believe will be instrumental in meeting South
Africa's growing energy demand, while creating sustainable and
permanent jobs for South Africans," said Shell South Africa
Chairman Bonang Mohale.
Shell's South Africa general manager for exploration, Jan Willem
Eggink, previously said that even once the moratorium is lifted it
will be at least another two years to carry out an environmental
impact and about nine years to do the exploration work.
Philip O'Quigley, chief executive at Falcon Oil & Gas Ltd.,
said it will likely take several months to get any exploration
license approval as well.
And once approval is received companies still face opposition.
The main environmental group leading opposition to Karoo gas
exploration slammed the move, saying it was "nonsensical" to lift
the moratorium before a public consultation.
"South Africa has made a hasty and ill-informed decision about a
very unpopular technology," said Jonathan Deal, chairman of the
Cape Town-based Treasure Karoo Action Group. The organization said
it intends to oppose any issuing of drilling licenses and is
considering taking legal action to prevent hydraulic fracturing
from taking place.
Write to Devon Maylie at devon.maylie@dowjones.com and Alexis
Flynn at alexis.flynn@dowjones.com