Johannesburg - The chances appear slim that the controversial Mineral and Petroleum Resources Development Amendment Bill, which envisages handing a stake in all new energy ventures to the state, will be passed by Parliament before it goes into recess next week.
Yesterday the portfolio committee on resources, headed by acting chairwoman Faith Bikani, reported that the committee would have only another week after this week to process the legislation. MPs, together with state law advisers and Department of Mineral Resources officials, went through the first part of the bill line by line.
Afterwards, Bikani told reporters that her committee “would have loved to pass the bill” before the end of this year but with Parliament adjourning next Tuesday, it was not going to be possible to process it in this time.
Bikani said the committee also had to take into account that there should not be any loopholes for legal challenges once the committee’s work was completed. DA MP Hendrik Schmidt said that it would “take weeks” to process the bill line by line.
While Theo Hercules, the principal state law adviser, said the definition of a free carried interest required further deliberation and drafting, in a copy of the bill it was defined as “a share in the net profits derived from the exercise of an exploration right or production right issued in terms of this act as acquired by the state… despite the state not contributing to the capital expenditure”.
It also defined the free carried interest as the interest derived from holding shares of which the holder – in this case the state – enjoyed “all the rights of a shareholder but has no obligation to subscribe or contribute equity capital for the shares”.
However, in another section of the bill defining “state participation”, it says the right of the state to participate in petroleum development at exploration and production operations would include a free carried interest “and may include production-sharing agreements in production operations”.
In addition to the free carried interest, a revised version of the bill reported that the state was entitled to a further participation interest of 30 percent “in the form of [an] acquisition at fair market value… or production-sharing agreements”. The state interest in any petroleum operation should not exceed 50 percent.
One representative of an oil and gas firm said this appeared to be “good news” as it could open the door to a production company being able to “offset costs” of production.
Changes in the legislation allow the state to hold a free 20 percent stake in all energy ventures. In addition, all mining companies could be compelled to sell part of their output for local beneficiation. This is dubbed “a strategic stake”.
Bloomberg reported that Anglo American and BHP Billiton had argued that this would hurt business, discourage investment and might violate South Africa’s constitution and its international trade obligations. - Business Report