The Star Late Edition



SOUTH Africa wants a free 20 percent stake in oil and gas exploratio­n and production ventures under a new upstream petroleum bill, which allows the minister to reserve petroleum blocks for black investors, a copy of the bill showed on Friday. The Upstream Petroleum Resources Developmen­t Bill approved by the Cabinet earlier this week is meant to help regulate a nascent industry in the country following new offshore gas finds by France’s Total that helped unlock a new petroleum frontier off South Africa’s coast. If the legislatio­n is passed in its current form, it could mean vast sums flow into state coffers. But it could also put off investors at a time when the world is turning away from fossil fuels due to climate change, and the impact of Covid-19 weighs on investment decisions by oil majors. Introduced by Mineral Resources and Energy Minister Gwede Mantashe, the bill deals specifical­ly with the oil and gas industry and is not lumped together with the establishe­d mining sector, after a broad push-back from oil companies on the “free carry” proposal when it was first mooted almost a decade ago. “The state has a right to a 20 percent carried interest in petroleum rights, including in both the exploratio­n and production phase,” the bill reads.

The bill defines “carried interest” as state participat­ion through an interest in a petroleum right, “which interest vests exclusivel­y for the benefit of the state and the costs of which are borne by the carrying holder of a petroleum right”. In terms of existing law, South Africa’s petroleum resources belong to the state and it is the custodian. The bill proposes that a new State Petroleum Company must enter into a joint operating agreement or become a party to an existing joint agreement. “The State Petroleum Company is entitled to full participat­ion, including correspond­ing percentage of voting rights as determined by the joint operating agreement.” The bill also allows for competitiv­e licensing rounds and stipulates specific time frames for exploratio­n licences and production permits to be used. |

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