South Africa to Shift Regulatory Focus on Oil and Gas
The South African government has announced plans for new legislation on oil and gas, which is intended to detach part of the regulation of these sectors from the wider minerals and energy cluster.
The move should lead to better focus, which in turn would stimulate investment in these sectors. It comes as South Africa is grappling with a major electricity generation crisis, which led to widespread black-outs last year, impacting both industry and households.
Energy Minister Tina Joemat-Pettersson told the South African parliament in Cape Town May 11 that gas development is one of the pillars of the country’s diversified energy mix.
“Going forward it is becoming more and more apparent that future energy demand will be a mix of electricity, gas and liquid fuels and, depending on the relative cost competitiveness of each of these, an equilibrium between the three will be established,” she said.
She explained that the country’s Integrated Energy Plan (IEP) forms the framework for detailed infrastructure plans in respect of the electricity, gas and liquid fuels sectors.
“Similarly, the Gas Infrastructure Plan will take its lead from the IEP, in regard to the gas pipelines, storage and other infrastructure that is necessary for meeting the energy demand through gas supply.
“The exploitation of our indigenous gas - coal bed methane and shale gas - as well as the regional natural gas resources must be seen in the broader context of regional integration,” Joemat-Pettersson argued.
Among the legislative changes being proposed are a Gas Amendment Bill, to allow the energy minister to direct the development of new gas infrastructure, including pipelines, storage and re-gasification technology for imported liquefied natural gas (LNG). The Bill will encompass the midstream elements of the gas value chain, whereas the upstream will be covered under amendments to the Mineral and Petroleum Resources Development Act (MPRDA). The Petroleum Agency of South Africa Establishment Bill will establish a separate upstream gas regulator.
“The plan involves separating from the mineral regulatory framework those elements that relate to the petroleum value chain,” explained the minister.
Meanwhile, she said an Upstream Gas Bill would cover the gas value chain, including the exploration and concessioning of conventional and unconventional gas. Industry has been concerned about legislative uncertainty in South Africa, following the stalling of changes to the MRPDA which would give the state a 20% slice of new investments in the energy sector and a further opportunity to increase this stake.
Johannesburg-based lawyer Emile Myburgh expressed concern that the energy minister’s new legislative programme would not in itself address industry disquiet.
“Investors want certainty, and this chopping and changing in an industry where investors are obliged to give the state a free share, is hardly going to add to our attractiveness as an investment destination, especially while oil prices are low,” he suggested.
However, energy spokesman for the opposition Democratic Alliance, Gordon Mackay, said that he largely supported the plan to separate gas and oil regulation from mining.
He said this is common international practice and the Department of Energy’s National Energy regulator “has demonstrated its competence as an effective and independent regulator.”
He argued that expanding the mandate of the regulator “will indeed support investor confidence and therefore investment.
“Further, greater involvement by the Department of Energy in gas particularly, where the Department already plays a vital political role via the Gas Utilization Master Plan (GUMP) would remove the continued uncertainty inherent in much of the MPDRA. This is good for investors and good for the country.”
John Fraser