A South African moratorium on fracking for shale gas that had been imposed in April 2011 has just been lifted. This could be a major move, since South Africa reportedly has some of the largest shale gas reserves in the world. Shale operations could cause a dramatic shift in the nation’s entire economy.
The moratorium was focused on South Africa’s Karoo region. According to Collins Chabane, a minister in the President’s office, the decision was made based on studies investigating the safety concerns over fracking in the region.
“When (the results of the study) … came back, they recommended that it was clearly safe for us to have that programme of exploration of shale gas,” Chabane told reporters on Friday.
Fracking has, of course, been a huge success in the U.S., though it has not been without controversy. A U.S. Energy Information Administration-commissioned study had previously stated that South Africa holds 485 trillion cubic feet of technically recoverable shale gas. That places it fifth among the 32 countries studied. Currently, the nation is heavily dependent on coal-fired power plants to the point where 85 percent of all plants run on coal. But shale operations could mean a solution to South Africa’s long-standing energy problems.
The lifting of the moratorium also presents significant opportunity for companies like Royal Dutch Shell (NYSE: RDS.A), Falcon Oil & Gas (CVE: FO), and Anglo American (PINK: AAUKY), which have applications awaiting approval. Shell, for example, stated last year that it would like to invest around $200 million in the Karoo for shale exploration purposes.
Developing a mere tenth of the region’s estimated resources would create 700,000 jobs and earn $24.2 billion a year in revenue, according to a Shell/Econometrix study undertaken earlier in 2012.
Environmental agencies and activists are not sold on the idea, and they have good reasons. The Karoo region, which is semi-arid and minimally populated, is home to several rare species like the mountain zebra and the riverine rabbit.
Fracking remains a controversial process, and there is no clear consensus on whether or not it holds the potential for water contamination and other environmental damage. Moreover, the sudden infiltration of enormous swarms of human beings into a relatively preserved area would not be a good thing for indigenous species.
But the nation has decided to move ahead with shale development, and that could mean major profit for the companies involved.