Sasol Ltd. (SOL), the largest producer of motor fuel from coal, urged South Africa to say what size stakes it plans to take in new energy ventures under proposed changes to the law as a way to reduce industry opposition.
Parliament’s mineral resources committee is holding public hearings into amendments that would give the state a holding in new oil and gas projects, a plan that has drawn opposition from companies such as Exxon Mobil Corp. (XOM) and Royal Dutch Shell Plc. (RDSA)
“We don’t know what the percentage is,” Johan Thyse, Sasol’s head of public policy and regulatory affairs, told lawmakers today in Cape Town. Concerns may be “easily remedied” by spelling out the maximum stake, he said.
The country imports 70 percent of its oil needs, with the rest produced by processing coal and gas. Shell will soon decide on whether to invest 4 billion rand ($400 million) to 5 billion rand in South Africa and is concerned about the proposed changes to the regulatory regime, Jan Willem Eggink, general manager for upstream operations in South Africa, told lawmakers.
Shell’s plans include drilling an offshore exploratory well in the Orange Basin off the country’s west coast, and onshore drilling for shale gas in the southern Karoo region.
“We need certainty today on what the rules of the game are,” Eggink said. “We need a fair return on investment.”
The chance of commercial success for exploration projects is about 10 percent to 30 percent and risks and rewards should be shared among all participants, Thyse said. Companies spend typically $10 million to $30 million on offshore seismic data and $50 million to $100 million on exploration drilling, and should be able to recoup some of that from the state, he said.
The government’s proposed amendments are to South Africa’s 2002 Mineral and Petroleum Resources Development Act.
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