PetroSA seeks key rights to all SA oil resources

By Donwald Pressly Time of article published Sep 12, 2013

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Johannesburg - PetroSA, the state-owned oil and gas company, has proposed to Parliament that an amendment bill, which significantly widens the scope of state involvement in mineral production, should designate it as the custodian of the state’s allocation for all petroleum rights.

Group chief executive Nosizwe Nokwe-Macamo, in a written submission to the mineral resources portfolio committee, proposed that any anchorage 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 Mineral and Petroleum Resources Development Amendment Bill, the state will already be able to declare a “free carried interest” in oil and gas. This will mean it will have an as-yet undefined share in the net profits derived from the exercise of a new exploration right or production right issued.

This power has already led to significant backlash from the industry, with Exxon Mobil 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.

Marek Ranoszek, Anadarko’s managing director in southern Africa, told MPs that the amending bill “is viewed as a major commercial risk”. Among financial uncertainties that would face oil and gas companies was the proposed 26 percent black economic empowerment participation.

He said it could make deep water exploration unviable. “State participation provisions are vague and provide the minister with wide-ranging discretionary powers.”

Public hearings on the legislation began yesterday.

The legislation will also give the state “an option” to acquire a further interest, “through a designated organ of state or state-owned entity” as determined by the minister of mineral resources in the gazette.

PetroSA, which runs the oil from gas operations at Mossgas in Mossel Bay, believes it is the perfect entity for the job earmarked for the public sector.

PetroSA also proposed that consideration should be given to reflecting a minimum 10 percent equity allocation for the state, “with the option to increase at a later stage to a capped 25 percent equity” stake. The current formulation of the amendment merely proposes that the state takes a share of the net profits.

PetroSA suggested even wider state intrusion should be considered.

It proposed that the state should be given the option to choose between taking a share of net profits or taking a share of the oil or gas production, the raw material.

MPs are considering the legislation – which could also see the state’s grip on the proposed hydraulic fracturing for gas in the Karoo expanding exponentially – for the next week in back-to-back public hearings.

One of the key elements of the amending legislation will result in the disbanding of the Petroleum Agency of South Africa (Pasa).

Its role as a government agency mandated to promote and regulate exploration for and production of oil and gas in South Africa, as well as to archive all geological and geophysical data related to such activities, would cease and regional managers appointed by the Department of Mineral Resources would fill its shoes.

This is one proposal in the bill to which PetroSA objects. “Pasa should be retained and designated as the regional office for onshore and offshore petroleum resources.”

The Chamber of Mines will be submitting its comment on the legislation. Chief executive Bheki Sibiya said “a particular concern to the chamber and its members relates to [the] beneficiation and developmental pricing of minerals”.

In terms of the bill, the minister can designate a share of output of minerals – such as coal – for local use. She can also determine, through regulation, the pricing of the designated local supply of minerals.

Bloomberg reported that Eskom had said local coal reserves should be developed and exploited in the “national interest”, with exports of some grades of thermal coal only being permitted after being offered to domestic energy producers at cost providing for fair returns.

The power utility says it and other domestic utilities should be consulted prior to the awarding, granting and renewing of coal exploration and mining licences and domestic energy producers should have first right of refusal on forfeited coal exploration rights. - Business Report

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