The Mineral resources ministry yesterday gave the clearest signal yet that the government intends to nationalise part of South Africa’s nascent oil and gas industry through allocating to itself a 20 percent free stake in all new oil and gas ventures – and the right to buy up to half of all such ventures.
Minister Susan Shabangu told a media briefing after Wednesday’s cabinet meeting that the state would reserve the right to a further 30 percent stake at “market-related” rates.
Webber Wentzel mining lawyer Peter Leon, speaking from Boston in the US, described this as “not good news”. He said while it was not clear whether this would apply both to exploration and production, it would add “substantially” to the hurdle rates for private sector companies involved in the oil and gas industry.
It also appears that state-owned PetroSA, which has focused on turning gas into petrochemical products until now, has big ambitions to become a major player in the oil and gas industry and to be recognised as a national oil company.
Its chief executive, Nosizwe Nokwe, told the portfolio committee on energy that the firm could not continue to operate as it had done because its profit had halved in the past year.
There was no doubt that the company’s profit would continue to decline it if carried on operating in the same way.
Thus, PetroSA had to start punching above its weight in new ventures in the oil and gas industries. She confirmed that the company was interested in “a free carried interest” in the nascent oil and gas industries.
This would emulate other national oil companies, including those operating in South Africa’s Brics partners, particularly Brazil.
Nokwe told MPs yesterday that the company “would like to see [legislative] changes which would allow us to operate in a different way”.
She was responding to a question from DA energy spokesman Lance Greyling, who asked her what was the potential for PetroSA becoming both a player and a regulator in the oil and gas industry – as it had suggested before the parliamentary mineral resources committee’s hearings on the Mineral and Petroleum Resources Development Amendment Bill.
She, however, did not comment further on this proposal.
However, PetroSA proposed in a written submission last month that any petroleum-bearing blocks that became available by relinquishment or abandonment should be offered to PetroSA as the national oil company “as a first right of refusal… or for PetroSA to determine the commercial value of this acreage before it goes to a bidding round”.
In terms of the highly controversial amendment bill the state would already be able to declare a “free carried interest” in oil and gas.
This would mean it would have a share – undefined at that stage – in the net profits derived from the exercise of a new exploration right or production right issued.
This proposal led at the time to a significant backlash from the industry with ExxonMobil, Royal Dutch Shell and Anadarko warning that this could deter massive future investment in South African waters, at a time when prospects for significant gas and oil finds are believed to be good. ExxonMobil, of Texas, and Shell, from The Hague, have stakes in offshore exploration blocks.
Citing the Oil and Gas Journal, Bloomberg reported yesterday that South Africa had proven oil reserves of 15 million barrels located to the south and off the west coast near the Namibian border.
Shell told MPs last month that the bill’s deficiencies “could lead to significant delays in planned investment”. The mineral resources committee is due to resume deliberations on its work from October 22.
Greyling said last night that PetroSA “has major ambitions to become a big state-owned oil company… it is looking to extend its influence both upstream and downstream”. This, he believed, should not be done in a way that “crowded out” the private sector.
“The last thing we want is to give complete preference to PetroSA at the expense of driving away private investment into that sector.”