SA is pushing ahead with its plans to boost its fledgling upstream petroleum sector by proposing a new bill that will create a state-owned company to manage the country’s oil and gas resources and interests.
The bill, which was released for public comment on Tuesday, seeks to merge three existing state-owned entities — IGas, PetroSA and the Strategic Fuel Fund — into a single entity, the SA National Petroleum Company (SANPC).
The SANPC will have a wide range of functions, including exploring, producing, refining, marketing and selling petroleum products, as well as promoting the development of the industry.
The bill is part of a broader regulatory overhaul under a separate proposed legislation called the Upstream Petroleum Resources Development Bill, which aims to separate the oversight of petroleum resources from that of mineral resources. It sets out the terms and conditions for the state’s participation in offshore petroleum projects, requiring a 20% carried interest for the state and at least 10% black ownership.
The SANPC will be the custodian of the state’s carried interest, meaning it will own a fifth of the output without paying any costs.
The bill also outlines the governance and funding of the SANPC, suggesting that the National Treasury may provide grants or impose special levies for the company during the first five years of its establishment.
SA has modest oil and gas production but hopes to unlock its potential after the discoveries by TotalEnergies in 2019 and 2020 of gas condensate fields off the coast of Mossel Bay, which could each hold more than 1-billion barrels of condensate.
According to Energy Capital Power, an Africa-focused energy investment platform, there are 15 projects in the pipeline between 2023 and 2027 to exploit SA’s estimated 27-billion barrels of crude oil and 60-trillion cubic feet of gas reserves on the south, west and east coasts.
The government says the new legal framework will enhance the development and growth of the upstream petroleum sector, improve the energy security of the country, create regulatory certainty, ease the doing of business and attract foreign investment.
However, the bill faces opposition from some who argue that it is out of touch with the climate crisis and contradicts SA’s commitments under the Paris Agreement to reduce greenhouse gas emissions.
They also warn that the bill will deter foreign investment and hamper the development of the industry, citing the ownership requirements and the carried interest as factors that will increase the cost of doing business, reduce profitability and create uncertainty in the industry.
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