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South Africa Committee Approves State Energy-Project Stake

A South African lawmaking committee adopted changes to laws that will give the state a stake in new oil projects and may force some mining companies to sell part of their production to local processors.

Eight ruling African National Congress lawmakers voted in favor of the amendments to the 2002 Mineral and Petroleum Resource Development Act at a meeting of Parliament’s mineral resources committee in Cape Town today. The change was opposed by two members of the Democratic Alliance, the main opposition.

Late changes to the draft law included giving the state the right to an unspecified share in all new oil and gas ventures at an “agreed price” or part of output, in addition to an existing provision handing it a free 20 percent stake in the projects.

The new formulation will “entitle the state to take over oil and gas companies in their entirety,” James Lorimer, the Democratic Alliance’s shadow minister of mineral resources, said in an e-mailed statement. “This last-minute change shows a depth of economic illiteracy that is hard to fathom. It is likely to end any prospect of oil companies spending on exploring what is thought to be major oil and gas reserves off South Africa’s coast.”

Lacking Clarity

The draft law previously limited the state to buying an additional 30 percent of energy projects at “fair market value.” Companies including Exxon Mobil Corp. and Royal Dutch Shell Plc criticized an early version of the legislation in parliamentary hearings in September, saying it lacked clarity and would deter investment.

The committee is due to conclude hearings on the draft legislation tomorrow ahead of a vote next week by the National Assembly. It will then be sent to the National Council of Provinces, Parliament’s second Chamber, for processing before being signed into law by the president.

South Africa imports about 70 percent of its oil needs, processing the remainder of its fuels from coal and gas. The country had proven oil reserves of 15 million barrels in January 2011, located to the south and off the west coast near the Namibian border, according to Oil & Gas Journal.

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