Falcon Oil and Gas Ltd.

Init2winit's post from a couple of days ago, (see below) seems to be a bit more positive on the fracking question, even though a ban on fracking remains in place. If they go ahead and keep a ban in place on "new" applications and go ahead with awarding exploration permits for Shell, Falcon and Bundu Oil - the S.A government is are going to get caught in limbo. Only by running a number of wells using fracking techniques will truly determine how big and successful the Karoo could potentially be.

My guess is that the key here is getting the exploration permit issued - then putting pressure on the government to release the already written guidelines on fracking - which will be strict enough to prevent any enviromental concerns for most South Africans. I have a feeling that Ms Shabangu is playing politics here and by saying that she may delay the fracking approvals by up to 2 years - she is garnering votes that they need to get reelected. Once the election is over - the fracking approvals will be almost impossible to hold off - if the exploration permits have been issued.

My biggest concern in this scenerio would be holding off on the exploration permits until after the election, but both Shabangu and the President have said the exploration permits will be issued before the election.

According to reports from South Africa, the department of mineral resources gazetted a key notice, the first part of which extends a ban on fresh applications for shale gas acreage in the Karoo.

However the second section is key as it paves the way for exploration rights to be awarded to Shell (LON:RDSA), AIM- and Toronto-listed junior Falcon Oil & Gas (LON:FOG, CVE:FO) and Bundu Oil, which is majority owned by ASX listed Challenger Energy (ASX:CEL).

The indications in-country are the award of licences will actually occur before the South African elections on May 7.

The gazette notice followed some highly encouraging comments by the country’s mineral resources minister, Susan Shabangu, at the Indaba mining conference in Cape Town last week.

There she told delegates: “We will move ahead decisively, yet responsibly with the exploration of shale gas, to unleash its potential contribution to, amongst others, cost-competitive energy security, employment creation and a range of other latent benefits to the country.”

It is interesting that while the licence awards will lift the embargo on exploration of this large, but environmentally sensitive area of South Africa, the ban on fracking remains in place.

However draft technical regulations governing the use of this technique were closed for consultation in November ahead of their adoption, which is seen as imminent.

Not that the fracking issue will bother companies, initially at least, as they take time to assess the full potential of their acreage.

For Falcon, which we have followed for some time now, the licence award will end a three-year period of limbo.

The decision it must make is whether to go it alone, or team up with its exclusive partner Chevron.

Given Falcon’s model, the City’s money is on the latter option.