The Upstream Petroleum Resources Development Bill (“the Bill”) was initially introduced on 1 July 2021, and represents a significant step in providing policy certainty and a stable investment environment for the South African oil and gas sector. The Bill aims to replace relevant sections of the existing Mineral and Petroleum Resources Development Act, 28 of 2002, as amended, to independently regulate oil and gas exploration and production.
Unfortunately, the Bill is a somewhat belated response to global competition aimed at attracting International Oil Companies (“IOCs”) and boosting economic development through increased investment. While South Africa grapples with its legislative processes, IOCs are swiftly moving into neighbouring countries that offer more accessible legislative frameworks and favourable fiscal terms. The Bill has finally passed through the National Assembly and has proceeded to the National Council of Provinces for concurrence.
Despite several delays, the Bill aims to bring about economic transformation within the oil and gas sector, with a focus on increasing the participation of black individuals and the state in the upstream petroleum sector. It also incorporates provisions designed to foster sustainable and equitable development of petroleum resources, ultimately benefiting all South Africans.
The Bill in its current form has received mixed response, with key players both commending and doubting the effectiveness of its provisions, including, inter alia –
- Investor-Friendly Legislation: The Bill aims to create a more investor-friendly environment in the oil and gas sector, which could attract IOCs and stimulate foreign investment in exploration and production activities;
- Improved Regulatory Clarity: The Bill attempts to provide clearer language regarding the principle of “once empowered, always empowered” potentially giving investors more confidence in the regulatory framework;
- State Participation and Cost-Sharing: The Bill places a strong emphasis on state participation, with state-owned entities expected to cover a significant portion of exploration and production costs. This could impact the financial resources available for other government priorities and may not be ideal for attracting IOCs;
- Delay and Competition: The prolonged process of drafting the Bill is a concern, especially when neighbouring countries like Mozambique and Namibia are actively attracting IOCs. South Africa risks losing out on opportunities in the global competition for oil and gas investments; and
- NGO and Climate Change Challenges: The absence of clear legislation is noted to attract NGOs focused on climate change issues, potentially creating challenges for the industry and the reputation of South Africa in the global context.
Overall, the Bill has the potential to shape the future of South Africa’s oil and gas sector, impacting investment, regulation, and the country’s economic diversification. The Bill’s effectiveness in addressing these issues, however, will depend on the timing of its implementation, which remains to be seen.
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