UPDATE 3-S.Africa lifts moratorium on shale gas exploration

* 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.

PERMANENT HARM

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."