South Africa and Uganda are amongst the African countries that are amending legislation in order to keep up with the continent’s oil rush.

Lizel Oberholzer, head of oil and gas at pan-African corporate law firm Bowman Gilfillan, noted that in South Africa the Mineral and Petroleum Resources Development Bill 15 of 2013 (MPRD Amendment Bill) amending the Mineral and Petroleum Resources Development Act 28 of 2002 was introduced into Parliament on 21 June 2013.

In Uganda, the Petroleum (Exploration, Development and Production) Act, 2013 (PEDPA) came into force on 5 April 2013 and repealed the Petroleum (Exploration and Production) Act cap 150 (PEPA).

“In South Africa and Uganda, amongst other countries, the method of applying for petroleum rights or licences, the significance of the regulator, state participation, and the duration of rights or licences have come under scrutiny,” said Ms Oberholzer.

Under PEPA and the MPRDA grants were made by way of direct application to the Minister. This position has changed under the PEDPA and the MPRDA, which now provide that areas open for bidding in exploration licensing will be announced in the government gazette.

However, in Uganda the Minister may in exceptional circumstances receive direct applications. These exceptional circumstances include instances where no applications have been received in response to invitation to bids, and instances where areas are adjacent to existing licensed reservoirs.

Ms Oberholzer said that, “From a practical point of view it would be recommended that South African legislators also consider providing for exceptional circumstances as is case is in Uganda.”

Another difference is that, while under the MRPD Amendment the independent regulator is disbanded in South Africa, PEDPA moves closer to international best practice and introduces the Petroleum Authority Regulator (PAU), which must exercise its functions independent of interference from any government entity, except in case of written and gazetted directives of the Minister.

“In addition PAU, must perform its statutory functions openly, fairly and in a rational manner. It is unclear why the South African legislator is moving away from international best practice,” said Ms Oberholzer.

Although neither the MPRDA nor PEPA provided for State participation in petroleum licences or rights, in practice such participation was negotiated in the petroleum agreements. This position has changed under the MPRD Amendment Bill and PEDPA which now make provision for state participation.

However, in both countries the percentage of state participation is not specified in the legislation. Since there have been significant discoveries in Uganda, this uncertainty may be acceptable to oil companies. However since no significant discoveries have been made in South Africa such uncertainty may scare investors away.

While in Uganda the initial period of the petroleum exploration licence was reduced from four years to two years under PEDPA, the initial period of the exploration right was increased from three years to five years in South Africa under the MPRD Amendment Bill.

“In practice it can be very expensive and time consuming to mobilise a drilling rig, and particularly in the case of Uganda, difficult to gain access to land. As a result, the exploration period of two years might be insufficient to complete work programmes.

“African Governments should learn from each other to establish regulatory frameworks that are in line with international best practice and encourage investment in the continent,” said Ms Oberholzer.