Gas boom gains ground, but state needs to revise the rules

The discoveries at Brulpadda and Rovuma basin have spurred renewed interest in exploration, hastening the urgency for government to come up with legislative clarity to attract investment.

10.11.2019

The discovery of large South African offshore gas deposits in February has buoyed the oil and gas sector, but legislation needs to be finalised to attract investors and ensure that citizens benefit from the exploitation of the country’s resources.

The discoveries at Brulpadda and Rovuma basin have spurred renewed interest in exploration, hastening the urgency for government to come up with legislative clarity to attract investment.

The discovery of gas in the Rovuma basin, off Mozambique’s northern coast, which holds an estimated 32 billion barrels of oil equivalent, has also spurred interest in drilling off KwaZulu-Natal – where Sasol and Italian multinational oil and gas company Eni have exploration rights.

The Brulpadda find – undertaken by Total, despite a lack of legislative and regulatory clarity on issues such as future cost recovery – has also renewed interest in exploration. This interest has been spurred by the recent publication of government’s long-awaited Integrated Resource Plan, which provides for an additional 3 000 megawatts of gas-fired power by 2030.

The Mineral and Petroleum Resources Development Amendment Bill of 2008 further stultified the development of the upstream petroleum sector by about five years, said Peter Leon, a partner at global law firm Herbert Smith Freehills and co-chair of its Africa practice.

“We need to get the ball over the line,” said Pillay. “Operators want to know that the rules of the game are set. They want to understand how they play within those rules, and to understand that if there are going to be changes down the line, how these changes will be effected. But the main thing they want to know is the price risk.”

He added that it was an encouraging sign that the department of minerals and energy was in constant consultation with the dti, other government departments and industry. “It is important that we have been called in at the very beginning of this process, and we are moving with speed to get a piece of legislation that seeks to create a win-win for industry and the interests of the country.”

“It is about framing a balanced discourse, taking into account the generous fiscal dispensation that we have. The key issue lies in ensuring the acceleration of exploration. We are moving with speed to create legislative certainty; we simply want to see exploration wells being drilled.”

Delivering the keynote address at Africa Oil Week, Mineral Resources and Energy Minister Gwede Mantashe said the Petroleum Resources Amendment Bill would “be before Cabinet soon”.

Despite a protest by global climate activist group Extinction Rebellion at the start of the conference, no mention was made of environmental concerns related to exploration and drilling during Africa Oil Week.

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