South Africa wants a free 20% stake in oil and gas exploration and production ventures under a new upstream petroleum bill, which allows the minister to reserve petroleum blocks for Black investors, a copy of the bill seen by Reuters showed on Friday.
The Upstream Petroleum Resources Development Bill, approved by cabinet earlier this week, is meant to help regulate a nascent industry in the country following new offshore gas finds by France’s Total TOTF.PA that helped unlock a new petroleum frontier off South Africa’s coast.
If the legislation is passed in its current form it could mean vast sums flow into state coffers.
But it could also put off investors at a time when the world is turning away from fossil fuels due to climate change, and the impact of COVID-19 weighs on investment decisions by oil majors.
Introduced by Mineral Resources and Energy Minister Gwede Mantashe, the bill deals specifically with the oil and gas industry and not lumped together with the established mining sector, after a broad pushback from oil companies on the free carry proposal when it was first mooted almost a decade ago.
“The state has a right to a 20% carried interest in petroleum rights, including in both the exploration and productions phase,” said the bill seen by Reuters.
The bill defines “carried interest” as state participation through an interest in a petroleum right, “which interest vests exclusively for the benefit of the State and the costs of which are borne by the carrying holder of a petroleum right”.
In terms of existing law, South Africa’s petroleum resources belong to the state and it is the custodian.
The bill proposes that a new State Petroleum Company must enter into a joint operating agreement or become a party to an existing joint agreement.
“The State Petroleum Company is entitled to full participation including corresponding percentage of voting rights as determined by the joint operating agreement.”
The bill, which will be publicly debated at parliament, also allows for competitive licensing rounds and stipulates specific timeframes for exploration licences and production permits to be used.
Source: Reuters (Reporting by Wendell Roelf; editing by David Evans)