Ramatlhodi raises MPRDA Amendment Bill concerns
The uncertainty created by the Mineral and Petroleum Resources Development Act (MPRDA) Amendment Bill in the oil and gas sector in South Africa has come to the attention of new Mineral Resources Minister Ngoako Ramatlhodi, who was starting to echo the sentiments of many companies and stakeholders.
As South Africa awaits the promulgation of the controversial MPRDA Amendment Bill in 2015, the Financial Times has quoted the Minister as saying he had advised the Presidency not to sign the Bill after hearing the concerns of industry officials.
The media report, published on Wednesday, outlined Ramatlhodi’s options of either recommending the Bill be sent back to Parliament to review contested clauses or have a separate petroleum Bill drafted so as not to combine legislation affecting the hydrocarbons industry with that affecting the mining sector.
Webber Wentzel partner and head of the mining regulatory group Peter Leon previously indicated that the Bill, which governs the mining and oil and gas sectors, entitled government to wider participation in exploration and production rights.
The Bill allowed the State a 20% free carried interest in petroleum rights and included an “uncapped” further participation clause enabling the State to acquire up to a further 80% at an agreed price or under a production sharing agreement.
Further, it was not clear how the State’s right to further participation would be exercised and professional services firm Deloitte questioned what would happen when a price could not be agreed upon.
This created uncertainty and risk that would increase the hurdle rates that investors apply, Deloitte said at a Deloitte in Conversation discussion earlier this month.
“State participation will [also] increase the cost to the investor, which means [that] petroleum companies will need to work harder to make a return on their investment,” the firm had said at the time.
The new legislation was expected to force mining companies to take an “even harder look” at their resource portfolio and become more selective about the resources they develop in an effort to reduce the number of dominant mineral rights owners and open up the market.
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