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Upstream Petroleum Resources Development Bill Tabled

July 2, 2021

Parliament

The Upstream Petroleum Resources Development Bill has been tabled in parliament.

The mineral resources and energy department published the bill’s explanatory summary in Government Gazette 44694 in June 2021.

Cabinet approved the bill in May 2021 for tabling in parliament.

In a statement, cabinet declared that the 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 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 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 bill aims to

• provide for orderly development of petroleum resources;
• provide for equitable access to, and sustainable development of, the nation’s petroleum resources;
• provide for active State and black persons’ participation in the development of the nation’s petroleum resources;
• provide for a petroleum right that integrates the right to explore and to produce;
• provide for the facilitation of acquisition of petroleum geo-technical data;
• provide for a controlled application system through licensing rounds;
• create an enabling environment for the acceleration of exploration and production of the nation’s petroleum resources;
• provide for third party access to upstream petroleum infrastructure;
• provide for a petroleum right holder to sell a percentage of petroleum to the State for strategic stocks requirements;
• designate a state-owned company as an entity responsible for managing the State’s carried interest in petroleum rights;
• provide for the advancement of national developmental imperatives by the state-owned company through the development of petroleum resources;
• provide for the holder of a petroleum right to retain its empowerment status after the exit of black persons under circumscribed circumstances;
• provide for local content as a development strategy to enable skills development, local recruitment and national participation through supply of goods and services;
• designate the Petroleum Agency of South Africa as the regulatory authority for the upstream petroleum sector; and
• provide for matters connected therewith.

The portfolio committee on mineral resources and energy will process the bill.