WHERE NEXT FOR SOUTH AFRICA’S UPSTREAM SECTOR AND WOULD-BE INVESTORS?

It has now been over two years since Total made its significant gas condensate discovery in the Brulpadda block, offshore Mossel Bay. The announcement led to much anticipation for the rapid development of an upstream petroleum industry in South Africa.

Recognising the need for a dedicated legislative framework for the oil and gas sector (which is currently governed by the long-standing, mining-focused Mineral and Petroleum Resources Development Act, 2002), in December 2019 the Government published a draft Upstream Petroleum Resources Development Bill (the Upstream Bill). Although the benefit of having dedicated, stand-alone legislation is undeniable, the draft Bill failed to deliver on a number of fronts (see our previous briefing on the Upstream Bill here). Since then, no updates to the Bill have been published (comments from the public were invited before 21 February 2020) and the text has not been submitted to Parliament.

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A MINING MAKE-OVER IN PROGRESS?

In his recent keynote address to the platinum group metals industry, Minister of Mineral Resources and Energy, Gwede Mantashe (the Minister) indicated that South Africa aims to increase the country’s share of global exploration expenditure to at least three per cent in the next five years. This is obviously laudable.

According to data published by Statistics South Africa (StatsSA), mining output rose by 0.8 per cent on a year-on-year basis in February 2021. StatsSA moreover reported that from January to February 2021, mining sector output rose by 3.8 per cent. This is a considerable improvement on the 8.4 per cent contraction observed in January 2021.1

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PETROLEUM BILL — OLD WINE IN A NEW BOTTLE

Author: Peter Leon

Regulatory scheme remains modelled on mining principles 

Much anticipation awaited the release of the draft Upstream Petroleum Resources Development Bill on Christmas Eve after a one-year gestation by the department of mineral resources & energy. The long-awaited bill is intended to create a new regulatory framework for the exploration and extraction of both onshore and offshore oil and gas.

This underdeveloped sector has long been viewed by the government as a potential economic destiny-changer. In 2014, during the Zuma administration’s Operation Phakisa (Sotho for “hurry up”), it was estimated that SA’s territorial waters sit atop 9-billion barrels of oil (40 years’ worth of national consumption) and 11-billion barrels of natural gas (375 years’ worth of consumption).

Drilling 30 exploration wells in 10 years could see SA producing 370,000 barrels of oil and gas a day in the subsequent 10 years — reducing the country’s reliance on oil imports (by up to 80%), as well as the energy grid’s dependence on coal; creating 130,000 jobs; and adding $2.2bn (R32.5bn) to GDP annually.

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SOUTH AFRICA: MINING 2020

Authors: Peter Leon, Patrick Leyden and Matthew Burnell

1. RELEVANT AUTHORITIES AND LEGISLATION

 

1.1 WHAT REGULATES MINING LAW? 

The mineral resources sector is primarily regulated by statute and in terms of the Mineral and Petroleum Resources Development Act, 28 of 2002 (MPRDA).

Black economic empowerment (BEE) in the mining industry is regulated under the Broad-Based Socio-Economic Empowerment Charter for the Mining and Minerals Industry, 2018 (Mining Charter III). Mining Charter III came into force on 1 March 2019 and significantly increased BEE threshold requirements in respect of ownership, procurement and employment equity. To understand the extent of the BEE obligations for South Africa’s mining industry, regard must also be had to the Implementation Guidelines for the Broad-Based Socio-Economic Empowerment Charter for the Mining and Minerals Industry, 2018 (Guidelines), which the Minister of Mineral Resources and Energy (Minister) published on 19 December 2018.

In addition, prospecting and mining activities are regulated by various environmental and health and safety laws which are considered in more detail in section 9.

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