Mineral Resources Minister Ngoako Ramatlhodi’s suggestion that South Africa should split the laws that regulate the oil and gas industry from mining legislation has received a cautiously positive reaction from industry experts.
Amendments to the Mineral and Petroleum Resources Development Act (MPRDA) allow the state to hold a free 20 percent stake in all energy projects, as well as a further undefined stake, leading to uncertainty in the industry.
“It might make a lot of sense to split the provisions for oil and gas from those regulating mining, because the industries are at different stages of development,” Ramatlhodi told journalists ahead of his budget vote speech in Cape Town on Tuesday, Bloomberg reported.
Parliament passed the amended MPRDA in February but it has yet to be signed by President Jacob Zuma.
Jacques Botha, the chief economist at Afriforesight, said a separate law to regulate the oil and gas industry was “not a bad idea”.
“The oil and gas industries are new in South Africa, and will present a fresh start for the country to follow global best practice,” Botha said.
Chris Bredenhann, the Africa oil and gas leader at PwC, noted there were differences between the oil and gas industry and the mining sector.
“It is easier to introduce and require black economic empowerment in the mining industry due to its maturity,” Bredenhann said.
He said mining was in the mature stage whereas the oil and gas industry was in the “expensive” exploration stage.
“By combining the two industries under one act this fundamental difference in maturity is ignored and both industries are required to comply with the same empowerment targets and state participation levels, which might not be appropriate at this point for oil and gas.”
The Chamber of Mines said in a statement yesterday that it encouraged the expansion and development of the local mining industry.
“The chamber is encouraged by the concerted effort to address legislative issues related to petroleum and shale gas,” the chamber said.
Exxon Mobil, Anadarko Petroleum and Total were among companies that objected to the amended MPRDA on the grounds that it was too vague, and would undermine their business, Bloomberg reported.
Ramatlhodi said changes to the legislation would be made if it was deemed inappropriate.
“Having spent time listening to stakeholders, and taking cognisance of the fact that under our constitution, a bill before the president can be referred back to Parliament if it cannot muster a constitutional test, I am ready for any eventuality,” Ramatlhodi said.
“In the event the current bill is assented to in its [current] form, I commit to a rigorous and transparent engagement with stakeholders, on draft regulations.”
Bredenhann said that the government “must ensure that it comes up with an attractive fiscal regime for investors and also balance the need for the country to benefit from its own resources”.
He added that South Africa was not recognised as a traditional oil and gas territory, and therefore it was important that an attractive, investor friendly oil and gas regime was facilitated by the government.