President Cyril Ramaphosa has signed the Upstream Petroleum Resources Development Act into law, with the new legislation paving the way for participation in the sector by the state and previously disadvantaged groups.
According to analysts at Moody’s, “the emergence of new hydrocarbon producers across Sub-Saharan Africa will allow for improvements in fiscal revenue and foreign-currency” generation. Ramaphosa’s signing of the new law is expected to stir up activity in exploration and spur development of the sector.
The new act seeks to “provide for orderly development of petroleum resources” and to provide for “equitable access to, and sustainable development” of SA’s petroleum resources. Other provisions include allowing for active participation by “state and black persons” in the development of petroleum resources.
Moreover, it provides for petroleum rights that integrate exploration and producers’ rights. It also seeks to solve challenges to do with the application systems as the Petroleum Development Act of 2024 will provide for a controlled application system through licensing rounds.
This is expected to help “create an enabling environment for the acceleration of exploration and production” of petroleum and to speed up access into the upstream petroleum infrastructure by third party players.
Under the new law, holders of petroleum rights will be allowed to sell a percentage of their produce to the state for strategic stock requirements.
The Petroleum Agency of South Africa has also been designated as the regulatory authority for the upstream petroleum sector.
Although the expected renewed exploration and discovery momentum is expected to be a boon for South Africa, Moody’s said accelerating global green energy transition “complicates access to external financing and increases uncertainty” over future revenues.
BUSINESS REPORT