Falcon Oil & Gas boosted amid reports South Africa’s new resource laws will be reviewed

There is increased hope that potentially stifling natural resource legislation in South Africa won’t make it into law.

South Africa’s new mineral resources minister, Ngoako Ramatlhodi, has reportedly asked the president to put on hold legislative changes.

The controversial proposals would transfer 20% of oil and gas assets to the government as well as set ‘buy-out’ clauses that could see the other 80% bought for a pre-determined price.

The proposals had been heavily criticised by the oil industry and Ramatlhodi has now reportedly called for a review.

The minister is quoted in the Financial Times: “They [the presidency] must hold, I must study it. I want to see what it looks like, and I’ve got legal opinion as well.”

“I’m aware people [oil companies] are on the ground so it means there’s work happening now, so we do need to clarify the thing very quickly.”

A decision on the proposed legislation would impact Total, Shell and ExxonMobil – all of which have offshore exploration projects – but it may also have significant implications for companies like AIM-quoted Falcon Oil & Gas (LON:FOG), which aims to build a business in the Karoo shale basin.

The exploration and extraction of shale hydrocarbons in South Africa, like several other countries, is in itself controversial and the path remains unclear.

Separate reports in recent months have claimed an existing moratorium on shale and fracking may soon be lifted as part of the legislative overhaul.

Falcon is well positioned, if and when the nascent industry is opened, with 7.5mln acres in the southwest part of the Karoo basin – which spans about 148mln acres and is provisionally estimated to host just shy of 400tln cubic feet of shale gas.

The AIM quoted company expects to be granted the right to explore its Karoo basin shale acreage this year.