* Moratorium was in place since April 2011

* SAfrica says study eased safety concerns

* Reserves seen among world's biggest of shale gas

* Exploitation seen as "game changer" for economy

By Wendell Roelf

CAPE TOWN, Sept 7 (Reuters) - South Africa has lifted a moratorium on shale gas exploration in the Karoo region, where the extraction technique of "fracking" might help tap some of the world's biggest reserves of the energy source and deliver a big boost to the local economy.

Collins Chabane, a minister in the President's office , said the cabinet had decided to lift the moratorium, imposed in April last year, after a study eased safety concerns over the method which has been highly criticised by environmentalists.

"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, or hydraulic fracturing, involves pressurised water, chemicals and sand being pumped underground to release gas trapped in rock formations. Some landowners and environmentalists say the process can pollute water supplies.

However, it has been increasingly taken up in the United States, releasing huge quantities of natural gas and setting in motion an energy revolution other countries are keen to follow.

According to an initial study commissioned by the U.S. energy information administration, South Africa has 485 trillion cubic feet of technically recoverable shale gas resources, most of which are located in the vast semi-arid Karoo Basin.

The reserves, which would rank as the fifth largest among 32 countries included in the study, could be a long-term solution for the energy problems of Africa's largest economy, which is under pressure to boost its supply of electricity and cut its dependence on coal, now fuelling 85 percent of its power plants.

A revocation of the moratorium could benefit Royal Dutch Shell, Falcon Oil & Gas and Anglo American , the Eurasia political risk consultancy said this year, calling it "a game changer" for South Africa's economy.

Oil major Shell said last year it hoped to invest $200 million to explore for shale gas in the Karoo and the company welcomed the government's decision.

Developing just a 10th of South Africa's estimated resources could boost the economy by 200 billion rand ($24.2 billion) a year and create 700,000 jobs, a study, commissioned by Shell and carried out by research firm Econometrix, said earlier this year.


But environmentalists said fracking would cause permanent harm. The sparsely populated Karoo is renowned for its rugged scenery and is home to rare species such as the mountain zebra and riverine rabbit, putting it high on the radar screen of conservationists.

"At the end of the day it is still fracking. They are going to use a lot of water with a enormous amounts of chemicals in them in an area that is water scarce," said Ferrial Adam, a climate and energy campaigner at Greenpeace Africa

There are five pending applications for exploration in the Karoo, three belonging to Shell and one each to Falcon Oil & Gas and Bundu Gas & Oil Exploration, according to state-owned Petroleum Agency of South Africa.

"Falcon and Bundu gas are the most advanced applications as they were received long before the Shell applications," an official at the agency said, asking not to be named and adding that the timing for final exploration rights being granted depended on further consultation and regulatory approval.

Petrochemicals group Sasol in November put its shale gas exploration plans on hold but said it would watch further developments.

South Africa last year imposed a fracking moratorium on oil and gas exploration licences in the Karoo region to study the potential gains and examine the concerns of environmentalists.

Jonathan Deal, chairman of anti-fracking Treasure the Karoo Action Group, said the revocation was hasty and ill-informed.

"If any exploration licenses are issued in future, we will appeal and naturally resort to litigation should our appeals fail," he told Reuters.

"The only way to defeat this technology permanently is to get a ruling in the country's highest court against fracking on environmental grounds."

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  • PRO: Potential Energy Independence

    Estimates by the <a href="http://www.eia.gov/pub/oil_gas/natural_gas/data_publications/crude_oil_natural_gas_reserves/current/pdf/arrsummary.pdf" target="_hplink">United States Department of Energy</a> put the number of recoverable barrels of shale gas at around 1.8 trillion. To put that into perspective, Saudi Arabia is estimated to have roughly <a href="http://www.opec.org/opec_web/en/data_graphs/330.htm" target="_hplink">2.6 trillion barrels of oil reserves</a>. Christopher Booker writes for <em>The Telegraph</em><a href="http://www.telegraph.co.uk/comment/columnists/christopherbooker/8500496/Shale-gas-could-solve-the-worlds-energy-problems.html" target="_hplink"></a> that there are enough world reserves to "keep industrialised civilisation going for hundreds of years"

  • CON: Water Pollution

    A <a href="http://switchboard.nrdc.org/blogs/amall/incidents_where_hydraulic_frac.html" target="_hplink">blog post by the Natural Resource Defense Council</a> explains that "Opponents of such regulation [of fracking] claim that hydraulic fracturing has never caused any drinking water contamination. They say this because incidents of drinking water contamination where hydraulic fracutring is considered as a suspected cause have not been sufficiently investigated." It then goes on to list more than two dozen instances of water pollution to which hydraulic fracking is believed to have contributed. A <a href="http://insideclimatenews.org/news/20111104/gasfrac-propane-natural-gas-drilling-hydraulic-fracturing-fracking-drinking-water-marcellus-shale-new-york" target="_hplink">new waterless method of fracking</a> has been proposed, but environmentalists are skeptical.

  • CON: Leaks More Emissions Than Coal

    Methane is a greenhouse gas and <a href="http://www.ucsusa.org/clean_energy/technology_and_impacts/energy_technologies/how-natural-gas-works.html#enviroimpacts" target="_hplink">major component of shale's carbon footprint</a>. Cornell Professor Robert Howarth said about a study he conducted, "Compared to coal, the footprint of shale gas is at least 20 percent greater and perhaps more than twice as great on the 20-year horizon and is comparable when compared over 100 years."

  • PRO: Burns Cleaner Than Other Fossil Fuels

    <a href="http://www.scientificamerican.com/article.cfm?id=natural-gas-could-serve-as-bridge-fuel-to-low-carbon-future" target="_hplink">Researchers at MIT found that</a> replacing coal power plants with natural gas plants could work as part of a plan to reduce greenhouse emissions by more than 50 percent.

  • CON: Hydraulic Fracking Has Been Linked To Earthquakes

    <a href="http://oilprice.com/Energy/Natural-Gas/U.S.-Government-Confirms-Link-Between-Earthquakes-and-Hydraulic-Fracturing.html" target="_hplink">Several earthquakes both in the U.S. and abroad </a> have been linked to the hydraulic fracturing process. One British company, <a href="http://www.cuadrillaresources.com/cms/wp-content/uploads/2011/11/Cuadrilla-Resources-Press-Release-02-11-11.pdf" target="_hplink">Cuadrilla Resources</a>, admitted in a report that its hydraulic fracturing process well "did trigger a number of minor seismic events."

  • PRO: Jobs

    <a href="http://www.treehugger.com/fossil-fuels/facts-on-fracking-pros-cons-of-hydraulic-fracturing-for-natural-gas-infographic.html" target="_hplink">The industry currently employs more than 1.2 million people</a> in the U.S., and the Department of Energy estimates that natural gas resources have increased nearly 65 percent due to fracking, according to a TreeHugger graphic. Additionally, <a href="http://www.bu.edu/energy/files/2011/07/Fracking-article-Sept-14-2011.pdf" target="_hplink">the gas industry accounts for about $385 billion</a> in direct economic activity in the country, a <em>Nature</em> piece reports.

  • CON: Companies Don't Have To Disclose Chemicals Used In Process

    <a href="http://water.epa.gov/type/groundwater/uic/class2/hydraulicfracturing/wells_hydroreg.cfm" target="_hplink">Fracking is exempt from the Safe Drinking Water Act of 2005</a>, thus allowing companies to conceal the chemicals used in the process.

  • PRO: Buys Time To Develop Renewable Energy

    Former chief of staff to President Clinton and former head of the Center for American Progress <a href="http://www.businessweek.com/magazine/could-shale-gas-reignite-the-us-economy-11032011_page_2.html" target="_hplink">John Podesta says natural gas can serve</a> "as a bridge fuel to a 21st century energy economy that relies on efficiency, renewable sources, and low-carbon fossil fuels."

  • CON: Requires Large Amounts Of Water

    The fracking process can require around <a href="http://www.hydraulicfracturing.com/Water-Usage/Pages/Information.aspx" target="_hplink">five million gallons</a> of water. In some cases<a href="http://www.treehugger.com/fossil-fuels/facts-on-fracking-pros-cons-of-hydraulic-fracturing-for-natural-gas-infographic.html" target="_hplink"> less than a third of that water is recovered</a>.