Oil and gas industry gives Bill its approval
Publish date: 13 February 2017
Issue Number: 714
Diary: IBA Legalbrief Africa
Category: South Africa
The offshore oil and gas industry has welcomed proposed amendments to the Mineral and Petroleum Resources Development Act that will allow companies to claim some production costs from the state as a participating partner in projects. A Business Day report says the proposals – if enacted – would provide the legal framework for the exploration and production of shale gas and offshore reserves. In the Bill, adopted by Parliament in 2014, the state was given a 20% free carried interest in all new exploration and production rights, whereas now the department proposes a system of cost recovery from the state during the production phase. The original Bill also entitled the state to a further participation interest, which would be exercised either through a production sharing agreement or through the acquisition of the interest at an agreed price. This provision has now been replaced with a governmental right of pre-emption for exiting right holders. Offshore Petroleum Association of South Africa chair Sean Lunn said the industry supported the proposed amendments. Norton Rose Fulbright’s Greg Nott said the proposals, if they were enacted, would increase the likelihood of foreign investment and provide legal certainty.