Splitting out oil and gas as part of the proposed amendment of the Mineral and Petroleum Resources Development Act (MPRDA) would be a progressive move by government, Democratic Alliance MP and Mineral Resources shadow Minister James Lorimer said last week. He criticised government for creating widespread confusion because of split views within government ranks regarding the MPRDA.

During a meeting of Parliament’s Mineral Resources Portfolio Committee, chairperson Faith Bikani proposed that oil and gas be treated separately from all other minerals.

“Only five of us attended the committee meeting,” Lorimer told Mining Weekly on the sidelines of the Mining Indaba, in Cape Town. “Four of us thought it was a good idea.”
However, the fifth attendee – a representative of the Department of Mineral Resources (DMR) – opposed the idea.

“This indicates that there seems to be a lack of agreement in the DMR and government on the way forward, which puts us in an unclear position,” Lorimer commented.

However, law firm Webber Wentzel’s Peter Leon noted that the committee, not the DMR, would decide the way forward. What the way forward would be, though, was entirely uncertain at this point.

Until shortly before the committee meeting last week, oil and gas companies operating in South Africa, the Chamber of Mines and government had been in closed talks about the proposed Bill and its treatment of the oil and gas sector, Mining Weekly understands.

These talks may have brought some understanding on government’s side that oil and gas should possibly be treated separately from other minerals, Lorimer said.

“One hears of progress on the MPRDA, and perhaps this suggests some progress,” Lorimer said. However, he said, the DMR’s position was that there was no mechanism to change the MPRDA’s treatment of oil and gas, and that this could only be changed at a later stage.

“Splitting out oil and gas from the MPRDA would be sensible,” Leon told Mining Weekly. “It’s been such a mess so far, with the free-carry and the general treatment of the sector.”

Government wants a 20% free-carry in oil and gas operations in South Africa, a move that is muting investor appetite, some say.

Mineral Resources Minister Susan Shabangu shed no light on this latest proposal. During her opening address at the indaba, she told delegates that the MPRDA Amendment Bill would make the country an even more investor-friendly destination, creating more stability and certainty. She is optimistic the MPRDA Amendment Bill will be enacted within her current term, before the general elections later this year. She made no mention of proposals regarding the treatment of the oil and gas sector.

However, the passing of the Bill in Parliament before election time leaves little time for big changes, such as the possibility of splitting oil and gas from the MPRDA.

The committee vote on the Bill can only take place after a clause-by-clause review of the proposed amendments. The date for this has now been postponed to after the annual opening of Parliament and the President’s State of the Nation address on February 13. Lorimer said the clause-by-clause review was tabled for February 18.

Possibly, the committee could then vote on February 19, with the Bill having been tabled in Parliament for discussion and voting.

This would make for tight timeframes, Lorimer noted, since the committee had been instructed by government to pass the Bill before Parliament rises. That, he said, should happen around March 1.