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Upstream Petroleum Bill on Track

May 19, 2021

Department of Mineral Resources and Energy

The Draft Upstream Petroleum Bill will be tabled in parliament in the near future.

The mineral resources and energy minister, Gwede Mantashe, announced this in the mineral resources and energy department’s 2021//22 Budget Vote Speech in parliament.

Cabinet approved the draft bill last week for tabling in parliament.

In a statement, cabinet declared that the draft bill provides the “legislative and regulatory framework to create a conducive environment for investment, growth and job creation in the upstream of petroleum resources market”.

It also provides clarity on, amongst others, the application system; permits and rights issuing; transferability of the rights; participation by black persons; participation of the State; the transitional requirements and the strategic stock requirements for petroleum rights holders to sell a percentage of petroleum at prevailing market price to the State Petroleum Company.

The draft bill designed to make provision for equitable access to and sustainable development of South Africa’s petroleum resources was published for comment in December 2019.

The draft bill aims to:

• make provision for equitable access to and sustainable development of the nation’s petroleum resources;
• provide for orderly development of petroleum resources, to create an enabling environment for the acceleration of exploration and production of the nation’s petroleum resources, to provide for active State participation in the development of the nation’s petroleum resources;
• provide for black person’s participation in the upstream petroleum sector;
• provide for the establishment of the Petroleum Agency of South Africa as the national regulatory authority for the upstream petroleum sector;
• provide for the objectives and functions of the Agency;
• provide for the constitution of the Board of the Agency, the appointment of the Chief Executive Officer of the Agency, the staff and the finances of the Agency;
• provide for the designation of PetroSA as a National Oil Company; and
• provide for matters connected therewith.

Some of the objectives of the proposed legislation include recognizing the right of the state to exercise sovereignty over all petroleum resources in South Africa, promoting equitable access to the country’s petroleum resources, facilitating participation by black South Africans in the upstream petroleum sector, providing for security of tenure in respect of exploration and production operations, ensuring that holders of production rights contribute to the socio-economic development of the areas in which they are operating and encouraging and promoting national development of petroleum resources by speeding up exploration and production.

The draft bill stipulates that the state has, via PetroSA, a right to a 20 percent carried interest in exploration and production rights.

It also declares that all applications for exploration and production rights must be accompanied by a shareholders’ agreement indicating the State carried interest.

Other developments highlighted by the minister include:

• Tabling of Gas Amendment Bill in parliament on 29 April 2021 – aims to unlock investment into the gas sector and facilitate the development of gas infrastructure;
• Mine Health and Safety Act under amendment – seeks to address challenges relating to health and safety of mine workers;
• Draft National Nuclear Regulator Amendment Bill – approved by cabinet for publication for comment – to be tabled in parliament in the current financial year – strengthens the enforcement provisions of the inspectors and the occupational safety exposure risks for the air crews. It also seeks to align with the International Atomic Energy Agency prescripts and its best practice; and
• Draft Radioactive Waste Management Fund Bill under development – aims to enforce the polluter pays principle for all nuclear waste generators.

In terms of energy generation, the department plans to issue additional Requests for Proposals as follows:

• 2 600 megawatts from renewable energy around August 2021.
• 513 megawatts from Storage around August 2021.
• 1 500 megawatts from Coal around December 2021.
• 3 000 megawatts from Gas around December 2021.
• 1 600 megawatts from renewable energy around January 2022.