Upstream Petroleum Bill nears finalisation

14th May 2021 By: Marleny Arnoldi - Deputy Editor Online

Law firm Cliffe Dekker Hofmeyr (CDH) expects the updated iteration of the Upstream Petroleum Resources Development Bill to be gazetted by June.

This follows after Cabinet approved the submission of the draft Bill to Parliament this week.

The Bill was first published in the Government Gazette in December 2019. Written submissions from industry stakeholders were submitted by February 2020.

Government consultations on the industry submissions were then conducted by the Department of Mineral Resources and Energy and the Petroleum Agency South Africa between April and May 2020.

In September 2020, government verbally presented its proposed amendments to the Upstream Petroleum Bill to industry stakeholders, to address the concerns raised by industry stakeholders,” says CDH director and oil and gas head Megan Rodgers.

What gave rise to an expedited process to get the legislation finalised was significant gas condensate discoveries by Total on the Brulpadda and the Luiperd prospects off the southern coast of South Africa.

Other notable gas discoveries was also announced, such as that of helium developer Renergen, which is developing the Virginia gas project, in the Free State.

Rodgers expects the Bill to include an introduction of the petroleum right, which will govern key terms for both the exploration and production phases of gas projects.

She also anticipates the introduction of a retention permit, which is to be granted in instances where development and production of petroleum is not possible owing to an unfavourable market to undertake gas market development.

CDH also envisions the end of granting of technical cooperation permits within the new legislation.

“We hope to see black-owned oil and gas companies having the right to dilute both shareholding equity and participating interest in order to raise funding to meet its participating share of costs,” says Rodgers.

She adds that CDH would like to see recoverability on the State carry with a percentage of the State’s annual share of production to be allocated for repayment of its proportionate share of exploration and production costs.

“We also hope to see all references to ‘production bonus’ and ‘petroleum rent tax’ removed from the Bill, given these fiscal terms had not been fully formed and created investor uncertainty,” notes Rodgers.