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Oil and gas legislative certainty expected soon – SA Minister

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Oil and gas legislative certainty expected soon – SA Minister

Mineral Resource Minister Ngoako Ramatlhodi

3rd September 2014

By: Esmarie Swanepoel
Creamer Media Senior Deputy Editor: Australasia

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PERTH (miningweekly.com) – Oil and gas players in South Africa should have clarity on potential legislation changes by as early as next week, Mineral Resources Minister Ngoako Ramatlhodi said on Wednesday.

Speaking to Mining Weekly Online on the sidelines of Paydirt’s Africa Downunder conference, Ramatlhodi said that a six-week think tank exercise would shortly come to a close, with the government hoping for a clearer picture as a result.

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“The oil and gas industry in South Africa is still new, and we have this lab going, and are hoping for results in the next week or so, which would give us a clear indication on how to regulate the sector, and if we need to create a separate Bill for the industry, or if it could be maintained under the Mineral and Petroleum Resources Development Act (MPRDA).”

Ramatlhodi has in recent months asked President Jacob Zuma to delay signing the MPRDA Amendment Bill into law, owing to concerns about the negative consequences of the oil and gas clauses. Some of the options that could be considered include sending the Bill back to Parliament to review the contested clauses or having a separate petroleum Bill drafted so as not to combine legislation affecting the hydrocarbons industry with that affecting the mining sector.

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The ‘lab’ work was also expected to deliver an outcome on how the government could approach State participation in oil and gas projects.

“State participation is an internationally-accepted practice, particularly within the petroleum industry, due to the strategic nature of petroleum resources, with the percentage depending on the prospects of the country as a petroleum region. It also ensures long term, stable part-ownership of oil and gas reserves and retains a domestic base,” the Minister said.

“As government we are open to partner with prospective investors in the development of our nascent oil and gas industries including shale gas. We are excited by the many opportunities presented by this development, and its potential impact in assisting us to realise our developmental objectives.”

Despite the current uncertainty around legislating the oil and gas sector, Ramatlhodi said South Africa’s gas industry would play a central role in meeting the country’s energy demand.

“Most definitely the gas resource would be fed into the grid. We need a multi-faceted grid. Energy is at the center of our need.”

Ramatlodi noted that as such, South Africa was eager to attract experienced explorers to the South African oil and gas industry, declaring the country “open for business”.

Webber Wentzel partner and head of the mining regulatory group Peter Leon previously indicated that the Bill, which governs the mining and oil and gas sectors, entitled government to wider participation in exploration and production rights.

The Bill allowed the State a 20% free carried interest in petroleum rights and included an “uncapped” further participation clause enabling the State to acquire up to a further 80% at an agreed price or under a production sharing agreement.

Further, it was not clear how the State’s right to further participation would be exercised and professional services firm Deloitte questioned what would happen when a price could not be agreed upon.

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