World Cup fever may be over in South Africa, but the search for shale gas is just getting under way.
Last November, I noted that Chesapeake Energy
There are a few notable things about this permit. For one, it took around eight months to process. That may sounds like a snail's pace, but Sasol expected this to take closer to 12 months. Perhaps we can read this quicker-than-expected turnaround time as a sign that South Africa's Petroleum Agency is making efforts to speed development along.
The second thing that caught my eye was the size of the permit area: roughly 88,000 square kilometers in the Karoo Basin (a major fossil site that spans nearly two-thirds of the entire country). That translates to about 21.7 million acres, and exceeds the size of South Carolina (ranked 40th by area among U.S. states).
If the shale rock in this vast area is indeed found to contain the special sauce necessary to produce commercial volumes of natural gas, Sasol is hardly overstating the case for this being a "game changer" for South Africa. The heavily coal-dependent country (coal powered 85% of its electricity generation in 2007) has been plagued by power outages for years, cramping the style of miners such as Gold Fields
Before you get too excited, though, there are a few more things to bear in mind. First, Falcon Oil and Gas and Royal Dutch Shell
In short, I wouldn't own any of these stocks for the potential upside from this South Africa shale play. But there's almost certainly nothing priced into the shares for this potential, either. Consider it a free option on a low-probability, high-impact outcome.
Chesapeake Energy is a Motley Fool Inside Value recommendation. Sasol is a Motley Fool Global Gains selection. Sasol and Statoil are Motley Fool Income Investor recommendations. Try any of our Foolish newsletter services free for 30 days.
Fool contributor Toby Shute doesn't have a position in any company mentioned. Check out his Motley Fool CAPS profile or follow his articles using Twitter or RSS. The Fool owns shares of Chesapeake Energy, and has an electrifying disclosure policy.