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Upstream Petroleum Resources Bill Heading for Parliament

June 15, 2021

Department of Mineral Resources and Energy

The Draft Upstream Petroleum Resources Development Bill is heading for parliament.

The mineral resources and energy department published the draft bill’s explanatory summary in Government Gazette 44694.

Cabinet approved the draft bill in May 2021 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.

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.