South African Oil Law Seen Unlikely to Be Approved Until 2022

South Africa’s draft oil exploration and production law is unlikely to be finalized for at least another year, despite the government’s call for the legislation to be expedited.

Parliamentary hearings and amendments to the Upstream Petroleum Resources Development Bill published earlier in June could take 12 to 18 months, according to Megan Rodgers, head of oil and gas at law firm Cliffe Dekker Hofmeyr.

Lawmakers are considering the bill two years after Energy Minister Gwede Mantashe emphasized to parliament the need to “speedily work” on regulatory and policy certainty in the industry to attract investment. The pledge came between two major discoveries by TotalEnergies SE off the coast of South Africa, though the French explorer in April ceased additional drilling to complete geotechnical studies.

“Once the bill is tabled in parliament the department has no influence nor control on how it is processed,” the Department of Mineral Resources and Energy said in a response to questions. “The minister has indicated the urgency of the bill.”

Offshore Oil

South Africa relies on imports and synthetic fuel production in order to meet demand for oil.

The need for specific oil and gas regulations has grown in recent years as shale resources gained interest in the arid inland Karoo region and international oil companies took licenses in South Africa’s relatively unexplored waters. Royal Dutch Shell Plc and Eni SpA hold offshore licenses, according to Petroleum Agency SA.

Some elements of the draft policy are unclear, according to Rodgers. The recovery of exploration and production costs from the state’s 20% stake is not outlined in the bill and left to regulations that will follow, creating additional uncertainty for the industry, she said.

The provision for royalties is the mandate of the National Treasury and will be provided for in a separate bill, the DMRE said. The department has engaged with the industry, providing it “with the confidence and assurance required to grow,” it said.

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.