South Africa May Delay Law to Get State Free Oil-Venture Stakes

South African legislators are weighing whether separate laws should be formulated to regulate the oil and gas industries, a development that may delay the state’s plans to take a free stake in new energy projects.

All South African minerals are regulated under the 2002 Mineral and Petroleum Resources Development Act, which is currently being amended by Parliament. Envisioned changes include compelling energy companies to cede 20 percent of all new oil and gas ventures to the state, which will have the right to buy a further 30 percent at market-related prices.

Parliament’s Mineral Resources Committee held a hearing on the changes yesterday, where Chairwoman Faith Bikani suggested that provisions covering oil and gas could be split and incorporated into a new law, said James Lorimer, a lawmaker for the opposition Democratic Alliance who sits on the committee.

“If we are going to have separate legislation, the sensible thing would be to leave the current oil and gas regime in place until the new legislation comes into effect,” Lorimer said by phone from Johannesburg today. “It doesn’t make sense to change it to something that is clearly not satisfactory and then change it again.”

Parliament is due to adjourn next month before elections that must be held by July, and any legislation before it that hasn’t been passed must be processed again from scratch.

DMR Rejection

Bikani’s proposal was rejected by officials from the Department of Minerals Resources, who favor a single legislative regime, Lorimer said. The committee is due to hold another hearing on the law on Feb. 18 “and that is when we are likely to find out what will happen,” he said.

Bikani, a lawmaker for the ruling African National Congress, and Mosa Mabuza, the department’s deputy director-general for mineral policy and promotion, didn’t answer calls to their office phones.

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.

Companies including Exxon Mobil Corp. and Royal Dutch Shell Plc criticized an early draft of the amended law in parliamentary hearings in September, saying it lacked clarity and would deter investment.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE