The Chairperson of the Portfolio Committee on Mineral Resources and Petroleum Resources, Mr Mikateko Mahlaule, welcomed the signing of the Upstream Petroleum Resources Development Bill into an Act of Parliament by President Cyril Ramaphosa on 29 October 2024.
Mr Mahlaule hailed this development as a culmination of the diligent work of the Portfolio Committee on Mineral Resources and Petroleum Resources of the 6th Parliament. That committee crisscrossed the country, reaching ordinary South Africans in all the provinces to express their views on the Bill - helping to ensure a law that carried the people’s voice.
The Upstream Petroleum Resources Development (UPRD) Act of 2024 will regulate the country’s capital-intensive upstream petroleum sector separately from the mineral sector, currently regulated under the Mineral and Petroleum Resources Development Act of 2002.
Effectively, Section 9 of the Act provides for the designation of a Petroleum Agency, which will administer all acreage for the exploration, development and production of petroleum in South Africa. The Petroleum Agency will perform many other functions, including, among other things, providing technical support to the minister for the promotion of onshore and offshore exploration and production of petroleum, as well as receiving and evaluating applications for reconnaissance permits, petroleum rights and retention permits in terms of the UPRD Act and make recommendations to the minister. Section 34, on the other hand, makes provisions for establishing the State Petroleum Company, which will manage state participation in petroleum exploration and production activities. The company will be entitled to a 20% interest in petroleum rights, including exploration and production.
Early in October 2024, the Cabinet approved submitting the South African National Petroleum Company (SANPC) Bill of 2024 to Parliament. The Bill establishes the State Petroleum Company, as contemplated in section 34 of the UPRD Act, through a merger of PetroSA, the South African Gas Development Company (iGas), and the Strategic Fuel Fund (SFF).
On 14 October 2024, the Department of Mineral Resources and Energy (DMRE) (soon to be the Department of Mineral and Petroleum Resources) published an explanatory summary of the 2024 South African National Petroleum Company Bill (SANPC Bill) in the Government Gazette, which confirms that the Minister of Mineral Resources and Energy intends to introduce the SANPC Bill in the National Assembly “shortly”. The public is invited to comment on the Bill before 20 December.
Section 31 of the UPRD Act deals with the participation of black persons in petroleum rights, stating that every petroleum right must have a minimum of 10% undivided participation interest by black persons. The 10% undivided interest may be diluted to no less than 5%, subject to a right of first refusal by the State on terms agreed to with the relevant black person to any funder of the company for purposes of raising capital. To this end, the dilution of black person’s participation will not trigger a requirement for the holder of the petroleum right to augment black persons’ participation interest to 10%. The holder or an applicant for a petroleum right who is not able to comply with the required black persons’ participation interest requirement ought to lodge a request for an extension to comply within a period to be determined by the Petroleum Agency.
Sections 101 and 102 deal with offences and penalties, respectively. Accordingly, any person found guilty of conducting reconnaissance operations, exploration and production of petroleum or commencement with work on any block or blocks without a reconnaissance permit, as well as exploration and production right, may be liable to a fine not exceeding 10% of the person’s or right holder’s annual turnover in the country and its exports during the person’s or right holder’s preceding financial year or to imprisonment for a period not exceeding four years, or to both a fine and such imprisonment.
With all, however, section 111(1) of the UPRD Act states that the Act comes into operation on a date fixed by the President by proclamation in the Gazette and that different dates may be so fixed in respect of different provisions of the Act. This implies that the provisions in sections 9, 31, 34, 101 and 104 remain on hold indefinitely until President Ramaphosa makes the proclamation.
Justice Molafo
5 November 2024
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