* Fracking moratorium lifted last year
* S.Africa believed to have vast shale gas deposits
* Minister says fracking vital for economy, energy needs
By Ed Stoddard
JOHANNESBURG, Oct (KOSDAQ: 039200.KQ - news) 10 (Reuters) - South Africa's cabinet on Thursday proposed new regulations to govern exploration for shale gas, an important step in opening up an industry that could provide new energy supplies for Africa's largest economy.
South Africa last year lifted a moratorium on shale gas exploration in its Karoo region, where fracking might tap what is believed to be some of the world's biggest reserves of the energy source.
The sparsely populated Karoo is renowned for its rugged scenery and is home to species such as the mountain zebra and riverine rabbit, one of the rarest mammals in the world.
The government signaled on Thursday it was keen to start exploiting the resource.
"Not only does the potential of shale gas exploration and exploitation provide an opportunity for us to begin production of our own fuel, but it also marks the beginning of the reindustrialization of the South African economy," Mineral Resources Minister Susan Shabangu said in a statement.
"By embarking on this process presented by hydraulic fracturing for the production of shale gas, we bring the country a step closer to the achievement of our objectives," she said.
Shabangu said the proposed technical regulations provided for the protection of water resources, an issue that has raised concern among conservationists as the Karoo is semi-arid.
Environmentalists also say water supplies could be polluted by fracking, in which pressurised water, chemicals and sand are pumped underground to release gas trapped in shale formations.
The proposed regulations include measures to protect wildlife in the region as well as its rich fossil deposits.
The prospect of energy exploration in the Karoo has raised alarm bells in South Africa, which has a large network of conservation groups and a history of green activism.
But South Africa also wants to reduce its heavy dependence on coal usage, which emits greenhouse gases linked to climate change. Close to 90 percent of the country's power supply comes from coal-fueled plants.
Developing just a 10th of South Africa's estimated resources could boost the economy by 200 billion rand ($19.56 billion) a year and create 700,000 jobs, a study, commissioned by Shell (LSE: RDSB.L - news) and carried out by research firm Econometrix, said last year.
The proposed regulations have been published in South Africa's government gazette and the public has 30 days in which to comment on them.