D-day for Shell’s legal showdown over Wild Coast
British oil major Shell and its partner, Impact Oil & Gas, are fighting to get back their right to hunt for oil and gas off the Wild Coast, which was annulled by the high court in Makhanda in 2022 after a challenge by environmental groups.
The Supreme Court of Appeal (SCA) is now seized with determining the legality of the right granted to Shell and Impact by the department of mineral resources & energy that would allow them to explore in the sea off the Wild Coast.
The high court’s decision was based on what it ruled was insufficient consultation with affected communities and traditional leaders. It found the government failed to consider the potential harm to fishers’ livelihoods, the effect on their cultural and spiritual rights, and the contribution of oil and gas exploitation to climate change.
The court found that Shell’s environmental management programme’s promises of jobs and more government revenue were not supported by evidence.
Shell and Impact will tell the SCA on Friday that the public was notified properly of the decision to grant the exploration right, and that the high court erred in dealing with exploration as a step in a single process that culminates in the production and combustion of oil and gas.
The legal showdown comes as Shell’s upstream activities have become increasingly important to the company in SA after it announced its plans to divest from its downstream operations as part of a global strategy to milk the upstream business. Reuters reported last week that Shell is in talks with Saudi Arabia’s state-owned Saudi Aramco to sell its petrol station business in Malaysia.
In November, the oil and gas major also entered into a sale and purchase agreement with Brazil’s state oil company, Petrobras, relating to the divestment of its downstream businesses in Uruguay and Paraguay as well as “certain assets” in Colombia.
Shell recently disposed of its downstream business in Pakistan to Saudi Arabia’s Wafi Energy.
Bloomberg reported on Friday that mineral resources & energy minister Gwede Mantashe said the government may consider granting fewer oil exploration permits to Shell due to its plans to exit the retail business in SA, which houses a network of 600 petrol stations countrywide.
Melissa Groenink-Groves of Natural Justice, one of the parties
to the litigation against Shell, said the Makhanda judgment was far-reaching, advancing the rights of many of other coastal communities.
“A finding any other way would be constitutionally regressive, and we are confident the SCA will uphold the decision of the high court. The persistence by Shell, Impact Africa and the state to overturn the judgment is a clear indication that these entities care more about corporate gains than upholding the rights of communities,” said Groenink-Groves.
Last year, Impact chair Johnny Copelyn lashed out at litigation on many exploration projects in SA, accusing President Cyril Ramaphosa of being “evasive” about his government’s position on oil exploration. The presidency denied the allegation.
“There is substantial litigation opposing such exploration work. The president ... has been particularly evasive about whether he supports such work, and it is unclear whether this will completely inhibit SA developing its own oil resources despite the obvious prospectivity of the blocks concerned,” Copelyn wrote in a letter to shareholders published in the annual report of Hosken Consolidated Investments.
HCI is the holding company of Impact.
“Such inhibition will ... oblige the country to continue to import its requirements at close to double the cost per barrel to the country ... total taxes on such oil production are about half the cost of the product,” Copelyn said.