Sakeliga recently submitted its comment on the Draft Upstream Petroleum Development Bill, 2019 to the Department of Mineral Resources and Energy. In our comment, we urged the department to carefully consider the form of petroleum development legislation it is in the process of developing. Moreover, we expressed concerns about the possible impact of Sections 38 and 39 of the bill on the efficient development of petroleum resources.
Section 38 intends to give a state-owned enterprise a 20% carried interest in petroleum exploration and development rights. Additionally, Section 39 applies BEE to exploration activities and allows for set-asides for 100% black-owned companies through the reservation of petroleum blocks by notice in the gazette.
Sakeliga believes that such interventions would amount to additional cost for firms seeking to develop petroleum resources in South Africa. Consequently, such requirements may serve as obstacles to petroleum exploration and development. If such requirements were to lead to economic inefficiencies, it could mean less development of petroleum resources than could freely be possible.
Our suggestion to the department is to subject Section 38 and 39’s requirements to an independent and objective economic impact assessment (EIA) as part of required socio-economic impact assessments mandated by the national treasury. The EIA should carefully consider the likely economic cost and trade-offs to petroleum resources development.
Read our brief submission to the department here.