Job Langbroek, analyst at broker Davy, highlights that the new rules include clear statements on how hydraulic fracturing processes should be conducted in the country.
The gazetting has removed a blockage to the issue of formal exploration licences in South Africa, Langbroek said in note.
“The publication of the regulations opens up the way for the issue of shale gas exploration licences to companies that had previously applied, including Falcon Oil & Gas,” he added.
“The news is a positive step forward for Falcon’s South African operations.”
According to Langbroek the expectation at Falcon is that an exploration permit will be issued this year.
The analyst added that Falcon is likely to follow the blueprint of its Australian venture, where a partnered programme is currently getting underway.
In South Africa’s Karoo basin Falcon has already been partnered with Chevron in technical cooperation permits, which cover 7.5mln acres.
“For the last five years, Chevron has been Falcon’s technical partner in South Africa and it is likely that it will certainly consider what arrangements might take place in the future,” he said.
“In any event, given how gas-short South Africa is, there is a ready market for a viable shale gas business, so we would expect that finding a joint venture partner will not be an issue for Falcon.
“The gazetting is the first step in this chain of actions and consequently it is an important event.”
Davy values Falcon’s asset base at 13.8p per share, versus the current share price of 9.5p, and Langbroek says the South African assets account for 7p of that estimate.
Falcon last week announced that its hotly anticipated Australian shale exploration programme had kicked off.
The company, which has a 30% stake in 4.6mln acres within the Northern Territory, today revealed that operations have begun at the first well location.
It is expected that the Kalala S-1 exploration well will now spud before the end of June, and the drilling will last between 35 and 50 days.
Kalala S-1 will be drilled to a depth of around 2,800 metres and it will target the Middle Velkerri formation to assess hydrocarbon saturation and reservoir quality. This will be the first of three wells in the programme.