Business
South Africa’s parliament passes bill giving state 20 percent of new oil ventures
South Africa’s parliament passed changes to its main petroleum law giving the state a stake of 20 percent in new gas and oil explorations. The bill also gave the mines minister wide-ranging discretionary powers to place certain minerals in a “value-addition” category, which means a portion of the extracted resource would have to be processed domestically instead of exported in raw form.
The speed in passing the bill ahead of general elections in May has alarmed petroleum operators such as Shell, Total and Exxon Mobil, which are looking to explore in South Africa in the wake of big offshore gas discoveries in neighboring Mozambique. It must still be signed into law by President Jacob Zuma before it becomes effective.
“There have been significant changes in recent days, which we have not been afforded an opportunity to comment on and which we are certain will have a chilling effect on investment in a high-risk and capital-intensive industry such as ours,” the Offshore Petroleum Association of South Africa (OPASA) said in a statement ahead of the bill’s passage in parliament.
Among its members are Shell, Anardarko, petrochemical group Sasol and BHP Billiton Petroleum. According to the Petroleum Agency of South Africa, the country has attracted the greatest interest in exploration so far in its history, with both onshore and offshore acreage snapped up.
Shell has been exploring for shale gas in the onshore Karoo area, while Total said in November it expected to drill its first offshore well in the Outeniqua Basin, about 175 km off the southern coast of South Africa. Australian junior explorer Sunbird Energy has been developing South Africa’s largest stranded gas field, Ibhubesi on the west coast, which had estimated reserves of 540 billion cubic feet of gas.
In addition to the envisaged 20 per cent “free carried interest”, the government introduced a new clause entitling it to further participation in the form of an acquisition at an agreed price or production-sharing agreements. “This bill also gives government the power to nationalize at fire sale prices any drilling operation that finds oil or gas,” James Lorimer, the opposition Democratic Alliance’s shadow minister of mineral resources, said during robust debate.
“Drilling companies can be forced, after they have given away 20 per cent free carried interest, to give away the other 80 per cent of the find at any low price the government is prepared to pay,” Lorimer said.
