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By Wendell Roelf  9/7/2012

CAPE TOWN (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

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