Tag Archive | Liquid Fuels Charter

Uncertainty in oil and gas exploration industry

Oil and gas industry criticizes MPRDA Bill…

Government’s definition of what an  oil and gas industry stakeholder is and the continuous use of that mysterious word “player” have both come in for some serious investigation after the recent hearings into the Minerals and Petroleum Resources Development Amendment Bill, which aims to grab a stake in oil and gas exploration industry and combine the BEE charters of both the mining and liquid fuels industry with regard to employment and beneficiation.

The minister now announced that the state will be able, it will be pr0posed, to acquire at first 20% in successful gas exploration ventures  without capital outlay (called “free carry”) and subsequently 50%.

In the case of this Bill tabled in Parliament, after public comment, participation with industry stakeholders, such consultation with stakeholders has been claimed by the minister involved both in print in the written background to the Bill as part of the tabled document and by the departmental of mineral resources in  briefings to the portfolio committee concerned.

Generally, liquid fuels companies are concerned at the suggestion that if both BEE charters are combined it is like “combining water and oil”, to quote one member, since the mining industry is more labour intensive with massive capital outlay and the liquid fuels industry is twice as capital intensive but with less manual labour involved but greatly higher risk issues in capital outlay.

According to a number of oil and gas industry exploration companies vitally affected by the proposals contained in the Bill, any discussions with the gas exploration industry  has neither happened nor were they even notified.

State participation

Considering the fact that the Bill proposes acquisition by legislation of shareholding in those companies and regulations, as yet unpublished, will vitally affect not only their balance sheet but whether they enter into ventures in the first place, makes this is extraordinary.

One imagines that not only are eyebrows raised in the international world of trading and investment but some unfortunate comparisons made to other failed states in Africa.

Certainly there is a fear of exploitation in Africa and not without undue reason. Also it was hoped that one set of reasonable rules, known well ahead, would bring the kind of certainty that was needed to key worldwide industries and this would bring in turn South Africa to the top of list in investment destinations in an otherwise very unstable and avaricious stable of governments to our North.

Lack of certainty

From what has been said during the hearings on the Minerals and Petroleum Resources Development Amendment Bill, the minister would seem to be way off mark with this new Bill, some of those making submissions saying it was the first time they got their voices heard and others stating that some of the conditions are outrageous.

Whilst the terminology “hearings” is used for such sessions after a Bill is tabled, we just hope that the minister is listening.

Posted in Energy, Facebook and Twitter, Finance, economic, Fuel,oil,renewables, LinkedIn, Mining, beneficiation, Public utilities, Trade & Industry0 Comments

Oil industry stakeholders to meet on B-BBEE audit

Chairperson Sisi Njikelana told parliamentarians and those who attended the portfolio committee of energy meeting on the audit findings of the Liquid Fuels Charter (LFC), that all stakeholders in the industry will  meet to discuss the way forward  to improve the black empowerment stake in the oil industry.

His comments followed a presentation of the audit by Moloto Solutions by Tseliso Maqubela, deputy director general hydrocarbons for department of energy (DoE) together with Ms Gosetseone Leketi, the DoE liaison officer who had worked on the audit. It is understood that that such a meeting has taken place and that procurement by the oil industry was a major discussion point.

Maqubela told parliamentarians that DoE could now proceed on the subject of black empowerment within the oil industry without just anecdotal information but with extra basic facts and home truths garnered in an exercise, which, with the exception of a few companies, was marked by good co-operation amongst the industry.

DoE had placed the audit findings on its website a week earlier, the original survey of the LFC being commissioned in 2010 and its findings being only up to that date. The document was placed before cabinet in April this year, the audit having been completed by Moloto Solutions as late as April 2011.

In the light of the fact that the LFC had an expiry date of 2010, the purpose of the audit, as explained by the minister of energy at the time, was to establish the level of compliance with the BEE factors laid out in the charter before renewal was negotiated if it was to be, the industry not having its own B-BBEE sectoral agreement through the department of trade and industry.

DoE in its recommendations following its own summation of the audit suggested that a sectoral B-BBEE code be developed through DTI after agreement at the recommended stakeholder’s meeting and that the issue of penalties for non-compliance should be debated.

However, Sisi Njikelana said that his approach to penalties was that they were not going to be “important” if all co-operated and that DoE would not necessarily have to legislate for this necessarily. But he reminded all present that “we do not have another ten years like before.” There had to be some very urgent improvements, he said.

“We need a systematic way to track demographics but in order to get meaningful change” all involved have to apply their minds”, he said. An official ongoing monitoring body that was more effective and constantly updated progress amongst oil companies was suggested by Njikelana.

In presenting their views on the report, Gosetseone Leketi of DoE said that oil industry participants had agreed to the application of the LFC in its industry ten years before BEE legislation was applied in South Africa generally.

Presumably now DoE would have to consider how to amend the LFC after negotiation with oil industry participants or alternatively consider a separate document along the lines of other sector industry BEE charters, studying the success and failure of the separate oil industry scorecard factors in South Africa and its verification system to date.

Concern was expressed by Moloto Solutions in the audit that the department of trade and industry, with its current work load, could take on another sector industry BEE draft.

In very broad principle, Moloto’s audit findings indicated overall compliance with the charter at 48% with black shareholding averaging at 18.91%, albeit narrow-based, with a very low participation by black women as shareholders. Only one company has met the LFC target for shareholding control which participants at the meeting assumed to be Total whose French shareholders had made a major sale to black owners upon exiting.

As far as the audit was concerned generally, Leketi said skills development areas stood out with a poor record, as did employment equity and also preferential procurement in certain aspects. On the issue of procurement, the audit findings indicated considerable effort by Moloto to establish the background and factors behind the procurement of crude oil and the mechanisms involved, which they had clearly found difficult to establish in some cases due to competitive factors.

Leketi noted that this was an area where black employees had to gain more control and experience, according to Moloto Solutions. Leketi said that this was a DoE view.

The report separates, as a distinct entity, employees who are “foreign nationals” and Leketi pointed to the difficulty some companies had in reporting structures on product issues where responsibility and organogram management structures were constantly changing without any reference to the particular trading conditions in any country.

For example, Maquebela subsequently said on this issue in discussions later, “Suddenly an international company with its head office in Hong Kong could decide that Africa would report through Egypt for, say, LPG, he said, and the management in that area would have no understanding of (B-BBEE) conditions applying in this country”.

Leketi, in presenting the report, said the audit stated up front that that punitive measures should be designed against companies that do not make “the 25% cut” and that “some way” has to be found the develop supportive cultures for BEE within company behavioural patterns, especially in line management.

Companies, the report said, should place on notice boards employment equity achievements and targets and companies should urgently upgrade their black recruitment programmes, especially amongst black women  and improve the overall knowledge base of the their own staff at all levels regarding BEE employer requirements and targets if achieved or not achieved.

The findings were specific, Leketi said, on the need for “employee capacity building” at all levels with reward and achievement acknowledge programmes to accompany skills acquisition, especially in “scarce skills” areas.

Maquebela stressed in his comments that in his view, on the aspects of skills training which was so absent in most companies (particularly scarce skills needed in cleaner fuel development, he said) that the principle of “learning by doing” should be emphasised and that “internationals” should take a lot more advantage of their ability to send employees overseas on training courses.

The meeting concluded by chairperson Sisi Njikelana saying that bearing in mind the date of the findings, “the industry must have another platform to express itself”.

Tseliso Maquebela agreed with this route but warned that he rejected those findings where oil companies had said during the audit that they were not aware of the conditions that they or their employers had to meet with regard to black empowerment.

“Nobody could be in this industry and not be aware of exactly where they stood in regards to targets, timings and the details of LFC requirements in addition to BEE regulatory aspects.”    He rejected any idea that employees interviewed should have been ignorant of why the audit was being conducted and what the onuses were upon on their employers.

He stated however that he agreed with the findings of the report that there was great ignorance generally amongst employees of the urgency behind the need for industry to re-organise along BEE lines and noted the comments in the audit that much appeared to be done in an atmosphere of haste after initial interviews had been conducted.

 

Posted in BEE, Cabinet,Presidential, Energy, Finance, economic, Fuel,oil,renewables, Justice, constitutional, Public utilities, Trade & Industry0 Comments

Government dissatisfied with oil industry BEE progress

A veiled threat was made to the oil industry by the department of energy (DOE) by deputy director general, Tseliso Maqubela, who recently said in Parliament it was important for companies to comply with BEE laws and that one of the implications of the failure to do so “will be to curtail the capacity of those who violate the law (by limiting) their capacity to import products.”

He told reporters at a press conference held to announce the findings of the audit into the oil industry’s performance in terms of the Liquid Fuels Charter that the “results are extremely disappointing given the timelines” and he said that his department was going to create a unit that will specifically deal with compliance in terms of the Liquid Fuels Charter.

“We will ensure that there is compliance on a daily basis, not only with the charter, but with all the other requirements of the law”, he said.

Energy Minister Dipuo Peters said on the same platform that government was not to be held to ransom by companies in the fuel sector that do not comply.   “This is emotional, political, as well as economical blackmail,” she told the media.   The law was being ignored, she complained, and she added that DOE “needed to make sure that all comply with and respect the laws of this country.”

The minister reminded the media that the charter was drawn up in 2000 and called for 25 percent black ownership across the value chain within 10 years but according to the audit “the average effective narrow-based black shareholding is 18.91 percent”.

She continued, “Out of this 18.91 percent, representation for black women stands at a meager 6.72 percent, while only one oil company, Total South Africa, has fully complied with the obligation for ownership by black shareholders.”

Two years ago, minister Peters said, DOE had called for amendments to the Liquid Fuels Charter and the Petroleum Products Act to give black players in the retail fuel industry access to the fuel infrastructure.     What was evident then was that the representation of women in all strategic areas listed in the charter was of great concern, when compared to the expectations of equity norms.

The audit had confirmed this fact and what was needed was for industry players to work together to correct that which was wrong, she said.

The energy department would study the findings and contact different role players to plan the way forward and address problems. The audit findings had been presented to Cabinet, she told reporters, and that matters would be referred to the economic cluster for further review.

SAPA reports that the SA Petroleum Industry Association has said it would speak to the department after an opportunity to review the findings.

Posted in BEE, Cabinet,Presidential, Finance, economic, Fuel,oil,renewables, Mining, beneficiation, Public utilities, Trade & Industry, Transport, Uncategorized0 Comments


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