Shell Delays South Africa Basin-Drilling Plan Due to Law Doubt

Royal Dutch Shell Plc, Europe’s largest oil producer, may drill South Africa’s northwest coast two years later than planned because of regulatory uncertainty.

“It is very difficult to go my bosses in the Hague and say I suggest we drill a well but I don’t know exactly what the rules and regulations are,” Jan Willem Eggink, general manager for upstream at Shell’s South African unit, told reporters in Cape Town. Drilling that was anticipated to start this year may take place in 2016, he said.

Shell, Exxon Mobil Corp. and Anadarko Petroleum Corp. are among the companies that have objected to proposed changes to South Africa’s 2002 Mineral and Petroleum Resources Development Act on the grounds that they are too vague and will undermine investment. The amendments 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.

Shell said in 2013 it may drill a well this year that would cost as much as $200 million in the offshore Orange Basin. The area is close to the border of Namibia in water ranging from 500 meters (1,640 feet) to 3,000 meters in depth, Eggink said.

South Africa 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 and Gas Journal. The country, isolated from foreign investment until apartheid ended in 1994, has no “significant” crude output, according to the U.S. Energy Information Administration.

No drilling is taking place in South African waters after Total SA suspended a drilling program off the southern coast of the country due to a technical issue with the Eirik Raude rig, the company said this month.

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