Free 20% state stake in South Africa oil and gas projects
State can increase shareholding up to 50 per cent
South African Mineral Resources Minister Susan Shabangu: made announcement at a briefing in Pretoria following a cabinet meeting. Photograph: Getty Images
All new oil and gas projects in South Africa will have to cede a 20 per cent free stake to the state under new legislation approved by government, mineral resources minister Susan Shabangu said yesterday.
In addition, the state can increase its shareholding in such exploitation projects up to 50 per cent, although the subsequent 30 per cent must be acquired at market-related prices, news agencies quoted Ms Shabangu as saying at a briefing in Pretoria following a cabinet meeting.
The decision to adopt the controversial new Mineral and Petroleum Resources Development Amendment Bill is unlikely to go down well with players in the global energy industry seeking to tap into South Africa’s oil and gas reserves, which are believed to be significant.
Last month oil companies Exxon Mobil and Royal Dutch Shell argued at hearings held in parliament that the proposed legislation could deter investment. Exxon plans to search for crude and natural gas off the coast of KwaZulu-Natal, while Shell is exploring oil prospects off South Africa’s west coast.
While there is little gas exploration under way in South Africa at present, there is huge potential for shale gas extraction in the Karoo desert. America’s Energy Information Administration estimates there may be reserves of 485 trillion cubic feet under the semi-arid desert.
There has been a moratorium on shale-gas exploration in the Karoo for the past two years due to the problems associated with the extraction method known as hydraulic fracturing or fracking.
Fracking involves pumping pressurised water, chemicals and sand underground to release gas trapped in rock formations. Landowners and environmentalists are opposed to the method.
Despite this Ms Shabangu said the government had now approved draft technical regulations for the exploration and exploitation of petroleum by means of fracking. “The proposed regulations prescribe good international petroleum industry practices and standards which enhance safe exploration and production of all petroleum [including but not limited to shale gas], and will further ensure that petroleum exploration is conducted in a socially and environmentally balanced manner,” she said.