Falcon Oil and Gas Ltd.

CAPE TOWN

Tue Mar 8, 2016 11:53am EST

South Africa will give the green light in the next 12 months to companies looking to explore for shale gas under the semi-arid Karoo basin, the government said on Tuesday, more than six years after firms such as Shell applied for licenses.

Royal Dutch Shell, Falcon Oil & Gas and Bundu Gas & Oil are among five companies which have applied for exploration licenses being reviewed by South Africa's Petroleum Agency, the regulator said on Tuesday.

The Petroleum Agency will submit its recommendations to the government by early May. The ministry of mineral resources will make the final decision on granting licenses.

"One area of real opportunity for South Africa is the exploration of shale gas," a statement from cabinet ministers responsible for the economy said.

"Exploration activities are scheduled to commence in the next financial year. This will lead to excellent prospects for beneficiation and add value to our mineral wealth."

Shell said last March it was pulling back from shale gas projects in South Africa due to lower energy prices and delays in obtaining exploration licenses.

The energy major, however, said on Tuesday it could still have an interest in exploring in the Karoo.

"Should attractive commercial terms be put in place, the Karoo project could compete favorably within Shell's global tight/shale gas and oil portfolio," the company told Reuters.

The Karoo region is believed to hold up to 390 trillion cubic feet of technically recoverable gas reserves.

A study commissioned by Shell said extracting 50 trillion cubic feet or 12.8 percent of potential reserves, would add $20 billion or 0.5 percent of GDP to the South African economy every year for 25 years and create 700,000 jobs.

Green groups and land owners in the Karoo, a vast semi-desert wilderness stretching across the heart of South Africa, have argued that exploring for shale by fracking, or hydraulic fracturing, would cause huge environmental damage.

Pretoria has been accused of dragging its heels in finalizing policy for gas and oil exploration.

(Reporting by Wendell Roelf; Additional reporting by Ed Cropley; Writing by Joe Brock, editing by David Evans)