South African Oil Law to Choke Investment, Industry Group Says

South Africa’s latest plans to secure the government a stake in all new oil and gas ventures will compromise the industry and threatens to choke off investment, an industry association said.

Parliament’s mineral resources committee on March 6 adopted changes to the 2002 Mineral and Petroleum Resources Development Act, which will give the state a 20 percent free stake in all new energy projects. The government will also be entitled to buy an unspecified additional share at an “agreed price” or part of their output. An earlier draft of the law limited the state to purchasing an additional 30 percent at “fair market value.”

“We have not been afforded an opportunity to comment” on the latest changes to the law, Sean Lunn, chairman of the Offshore Petroleum Association of South Africa, said in an e-mailed statement today. The association is certain the measures “will have a chilling effect on investment in a high risk and capital-intensive industry such as ours.” Opasa’s 13 members include Anadarko Petroleum Corp., BHP Billiton Ltd., Exxon Mobil Corp. (XOM), Sasol Ltd.’s petroleum international unit and Total SA.

The National Assembly, which is dominated by the ruling African National Congress, is scheduled to vote on the new law on March 12.

To contact the reporter on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net Ana Monteiro, John Viljoen

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