In a move that is likely to create more uncertainty in the petroleum sector, Mineral Resources Minister Gwede Mantashe last week published a notice restricting applications for oil and gas exploration and development in order to allow his department to change its licensing process.
The South African oil and gas industry is said to hold the key to the country’s energy security challenges. But the proposed amendments to regulations governing extraction have created additional uncertainty for local and international investors, the Davis tax committee said in a report in 2017.
According to the notice published in the Government Gazette on June 28, the moratorium will not affect applications received before the date of publication of the notice.
The sector has been hampered by uncertainty, which has stifled its growth. Royal Dutch Shell in 2017 relinquished a licence to search for oil off SA due to legislative uncertainty.
Other companies with permits in the country’s mostly unexplored offshore fields have diluted work programmes as they wait for greater clarity.
The South African Petroleum Industry Association said close to 20% of SA’s fuel needs were being met by refined product imports. This was likely to continue to increase, unless major investments were made in SA’s six refineries.
Lindiwe Mekwe, the acting CEO of the Petroleum Agency SA, said it was significant to note that the restrictions stipulated in the Government Gazette did not affect applications that were lodged prior to the publication notice.
"The restriction by the minister is part of a licensing strategy that is primarily aimed at using licensing as a tool to achieve the transformation ideal encapsulated in MPRDA [the Mineral and Petroleum Resources Development Act] and fast-track exploration. To that end, the petroleum agency is working on the modalities and processes that will inform the invitation for application dispensation as approved by the minister of mineral resources," she said.
The ANC has implemented legislation aimed at redistributing SA’s mineral wealth more equally among South Africans to make up for racial discrimination during apartheid. Delivering his budget speech in May, Mantashe said that applications for shale gas exploration rights in the Karoo would be fast-tracked. He said exploiting these reserves could transform SA’s energy economy.
PetroSA had reported that about 205-trillion cubic feet of shale gas is believed to be "technically recoverable" by fracking in the southern Main Karoo basin, Mantashe said.
His department had received three shale gas exploration rights applications.
According to the Davis committee, the oil and gas industry is still in a nascent stage of development, with uncertainty with regard to the size and commercial recoverability of oil and gas reserves offshore (deep-water) and onshore (shale gas).