Oil Draft Regulations for South Africa ‘Ready in Weeks’

Draft regulations on oil and gas exploration in South Africa will be ready within weeks so that companies can comment on the proposed rules, Mineral Resources Minister Ngoako Ramatlhodi said.

“May well be that the industry is satisfied, is comfortable with the regulations,” Ramatlhodi said in an interview today on the Eirik Raude, a drilling rig hired by Total SA that’s in waters off the country’s southern coast. The government would then “move forward, allow them to do more drilling,” he said.

Proposed changes to South Africa’s 2002 Mineral and Petroleum Resources Development Act include giving the state the right to a free 20 percent stake in all new energy ventures and to buy an unspecified additional share at an agreed price. Total, Exxon Mobil Corp. and Anadarko Petroleum Corp., who also have stakes in offshore prospects, are among those that have objected to the law on the grounds that it is too vague and will undermine their businesses.

“It’s the government’s position, which must then be negotiated with stakeholders,” Ramatlhodi said. “They must make an input into that. Eventually we have to agree.”

Total, with partner Canadian Natural Resources Ltd., holds exploration rights in Block 11B/12B, about 175 kilometers (109 miles) off the coast in the Outeniqua Basin, where it’s drilling a deepwater well.

Total has “communicated to me that it would be quite important that we settle the bigger issues going forward quickly, which would allow them to do more,” Ramatlhodi said. A draft law may be three to four weeks away, he said.

Karoo Shale

The Paris-based oil company is drilling its first well off South Africa’s continental shelf. Work will take three to four months and cost as much as $200 million, Total Exploration and Production head for South Africa Henry Delafon told reporters. The well has a targeted depth of 3,500 meters (11,500 feet) in water 1,500 meters deep.

The minister said on July 15 that South Africa should consider drafting separate laws to regulate the fledgling oil and gas industry, which includes exploring shale deposits in the arid inland Karoo region. While parliament passed amendments to the MPRDA earlier this year, Ramatlhodi asked President Jacob Zuma to hold off on signing them into law pending a review by a committee.

“We don’t want a situation where the minister sits in his office without involving people who are putting money in the sea or in the Karoo,” he said.

Extract Concessions

Ramatlhodi took over from Susan Shabangu as mineral resources minister in May, after the African National Congress extended its two-decade rule in elections that month.

“The planned ministerial review panel provides a rare window of opportunity for upstream companies to extract concessions on the bill’s onerous terms,” Anne Fruhauf, southern Africa analyst at New York-based risk adviser Teneo Intelligence, said in an e-mailed response to questions.

“Growing ANC concern over lagging economic growth and investment may also help international oil companies, to extract regulatory concessions,” Fruhauf said.

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