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Upstream Petroleum Development Bill on Track

February 4, 2020

Department of Mineral Resources and Energy

The mineral resources and energy minister, Gwede Mantashe, has revealed that positive comments on the Draft Upstream Petroleum Development Bill have been received so far.

The minister was addressing the 26th Investing in Africa Mining Indaba in Cape Town.

The draft bill was published for comment in December 2019.

It 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, provide for security of tenure in respect of exploration and production operations, ensure 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.

The mineral resources and energy minister will also be able to “reserve a block, part of a block or blocks in an open area for national developmental imperatives”.

According to the minister, the positive sentiment is a signal that the department is on the right path.

The minister also reiterated that policy and regulatory certainty are key to attracting investments.

“To this end, we remain committed and continue to work with the investor community on improving our regulatory framework to provide such certainty.”

The minister also confirmed that the department was in the process of gazetting a revised Schedule 2 of the Electricity Regulation Act.

This will facilitate self-generation and municipal generation options under “Distributed Generation” that will close the energy gap caused by deteriorating Eskom plant performance.

“Depending on the circumstances, the generation plant may only require registration and not licensing.”

The department also wants to see an increase in exploration by growing the national target from below 5% to respectable levels within the next few years.

The minister announced that a mining and beneficiation masterplan for the mining sector was under development as part of implementation of the Mining Leadership Compact.