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 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., 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.
Copyright (c) 2012 Dow Jones & Company, Inc.
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