Tag Archive | PASA

PASA ready for fracking and sea gas

Gas regulator separate from others….

In a presentation to Parliament, the strategic role of the new Petroleum Agency of SA (PASA) was debated and government officials showed MPs that estimations indicated that at least 20% of PASA’ future effort would be spent on contributing to the legislative and regulatory framework surrounding shale gas in South Africa.

Two major areas of gas and oil exploration revenue for the new body were clearly indicated as income from shale gas operations, or “fracking”, and also from maritime gas investments mainly off the East coast of South Africa, and from current operations on the West coast which were also to be extended, PASA officials said.

Licensing revenue from gas

Current inland petroleum operations and possible extensions of exploration within the main body of South Africa would also continue as a source of revenue, PASA said.

The present mandate of PASA, parliamentarians were told, was to facilitate and regulate the exploration and sustainable development of oil and gas “for the benefit of all South Africans”.     Cash flows from licensing were expected to increase from the forecast R13.7m for 2013 to R147m by 2017 which would be used for oil and gas investments although this was not necessarily ring fenced according to national treasury.

MPRDA includes PASA

The licensing process in terms of the Minerals and Petroleum Development Act, under which PASA falls, includes receiving applications for oil and gas reconnaissance permits, technical co-operation permits, exploration rights and production rights.

In all instances, the major focus, PASA officials indicated, would be to advise and regularly report to the minister of energy affairs on recommendations regarding the industry and “to receive, maintain, store, interpret, evaluate, add value to, disseminate or deal in all geological or geophysical information related to petroleum”, such a data base being the most important part of current work being undertaken.

Skills to be acquired

The future includes the establishment of a force of a number of geologists with specific specialist knowledge, particularly in the near future to support South Africa’s current claim to the international agencies for the extension of its maritime territorial limits.

This is to include some 45,000 km2 off the West Coast of South Africa; about 560,000 km2 in the vicinity of the Prince Edward Islands owned by SA; an area 190,000 km2 south of Madagascar; and the largest area which includes sections of the Mozambique Channel amounting to 1,075,000 km2.

Mozambique Channel

Most of the current litigation involved the application for the area known as “Discovery Ridge” in the Mozambique Channel, where gas deposit realisations are expected to be high.

Income for the new function, other than from “exploration rental” and application for exploration fees, was expected to mainly come from the sale of data but, for the present moment, PASA is expected to operate, for the current year, at a major loss of some R74m as it establishes its mandate, awaits the legal outcome on the moratorium on shale gas exploration and continues to support South Africa’s application to extend its nautical offshore limits.
Refer previous articles in this category
http://parlyreportsa.co.za//cabinetpresidential/to-ignore-fracking-would-be-an-opportunity-lost/
http://parlyreportsa.co.za//bee/mprda-bill-causes-contention-parliament/
http://parlyreportsa.co.za//energy/chemical-industries-plan-for-training-skills-in-fracking/

 

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Objections to Minerals and Petroleum Resources Bill

Exploration investment threatened……

Roughnecks wrestle pipe on a True Company oil drilling rig outside WatfordProposed changes to the Minerals and Petroleum Resources Bill (MPRDA) were given the “thumbs down” sign by a number of international participants in the oil and gas industry who provided the minister of mineral resources with a solid indication that the amendments to the Bill are not acceptable as they stand if major investment is to be expected or gas exploration encouraged.

Shell SA was largely ambivalent, although calling for greater clarity on a number of issues.

Confrontation was clearly evident from some of the submissions made by members of the oil and gas exploration industry, however, to a number of principles contained in the MPRDA Bill, the most common issues being lack of clarity for investment purposes and objections to the consolidation of the B-BBEE charters for mining and liquid fuels.

Plenty to think about

oil rigWhilst the chairperson of the portfolio committee of mineral resources claimed there were over six hundred pages from the private sector on the subject which the minister of mineral resources already had stated would probably be a contentious matter, a number of exploration companies were quite vociferous in their objections, both in their oral hearings and when it came to questioning from MPs.

At the last minute the submission from PetroSA was withdrawn subsequently explained by the CEO of PetroSA to the portfolio committee on energy as being for reasons of signatures to various confidentiality agreements.

The amendments contained in the Bill are extensive, including proposals to seek to promote beneficiation of resources: extend government ownership into all ventures; place two state officials on the boards of companies to monitor BEE compliance; the combining of both industry BEE charters; the dissolution of the Petroleum Agency of SA (PASA) and to declare “certain minerals” as strategic resources.

Anadarko at sea over Bill

anardarkoAnadarko SA, a subsidiary of Anadarko Petroleum Corporation who stated they were one of the world’s largest independent oil and gas exploration and production companies with over 5,000 employees and were currently in partnership with PetroSA in Mozambique waters, said their primary areas of concern with the MPRD amendments were that they caused total fiscal instability and uncertainty, something they were not used to working with.

They preferred a dedicated regulator to deal with the oil and gas industry who dealt with only that, they said.   On the issue of fiscal stability, their CEO, Emil Ranoszek, stated that the new Bill “lacked robust economic stability provisions to protect the rights and legitimate expectations of existing rights and permit holders going from an exploration right through to a production right”.

Risk at unacceptable levels

Anadarko, he said, was “committed to establishing a mutually beneficial relationship with the South African state and that oil and gas companies and (they) were ready to make significant investments in South Africa but the Bill in its current form disturbed this balance and raised commercial risk to unacceptably high levels”.

Ranoszek noted that PetroSA was a 20% shareholder in the areas where Anadarko already had a license.    Anadarko was one of the few companies in the world, he said, which had the technical knowledge to “draw the water depths” where they were currently working. If the terms, conditions and risks were deemed to be too high and Anadarko decided not to proceed with operations, then the company would relinquish its licenses.

How PetroSA was going to decide to handle such a situation was unknown and he could not speak for them.

Money flowing to communities

When asked how Anadarko was contributing to the job creation situation in Mozambique, Ranoszek replied that this had been both in the form of direct and indirect jobs from services providers and other sourcing companies. The revenue generated was in the billions of dollars, he said, with the result that Anadarko “was literally building small towns along the coast.”

Anadarko was presently funding a programme in a Mozambican University for the study of petroleum engineering “to upscale the locals in terms of petroleum skills and knowledge.”

ExxonMobil says no clarity

Exxon mobileRuss Berkoben, president of ExxonMobil said the amendments would have several adverse consequences for the growth potential of the South African oil and gas industry. There was “much ambiguity as to the State’s intent”, he said.

Clarity was required regarding the concept that the state would be issuing so-called special shares if it exercised an option for an interest and the state’s right to appoint two directors to a management board of a production operation.”  The Bill gave no clarity on how such matters would be applied.

Berkoben said the minister had to recognise the differences between the petroleum industry and the mining sector and it was his opinion was that PASA should be retained as a body, an entity that understood many of the complexities of his industry, some of which he outlined.  The dissolution of PASA was unwise, he suggested, and with no idea of what regulations were intended, the situation regarding investment had become totally fluid.

BEE  and beneficiation a problem for industry

On the issue of the proposed fines for non-BEE compliance, ExxonMobil said that this would further compromise the viability of certain petroleum operations and discourage expenditure on exploration and development work programmes.  On beneficiation requirements Berkoben stated that he could not visualise how these were applicable to the petroleum exploration or gas industry in reality, other than the minister having rights to offer fuel to outlets with different pricing structures downstream.

When asked by MPs if ExxonMobil had consulted at ministerial level on the Bill and its proposals, Berkoben replied that the answer was simply that ExxonMobil had not been consulted as a stakeholder originally regarding the basis of the proposed changes and he felt that they were being imposed on the oil and gas industry. They were unwarranted, he said.

SA may loose opportunity

impact fieldSean Lunn, managing director of Impact Oil and Gas Ltd, told the committee that the company held an exploration right and three technical cooperation permits along the eastern coast of South Africa and prospects so far identified lay in very deep water and a long way offshore, with the Agulhas current which heavily impacted on exploration along the coastline.

He explained that the oil and gas exploration industry was a dynamic, worldwide business and countries were ranked by their “prospectivity” in fiscal terms, resulting in an industry that was willing to take such risks as proposed on South Africa’s East Coast, one of the most dangerous in the world, when it provided the rewards that were commensurate with the risks taken.

Impact was partnering with ExxonMobil, he explained, and the potential benefits for South Africa “were great, not to mention that the country could become self-sufficient in oil and gas.  South Africa was currently considered to have very high geological risk as no major oil or gas fields had yet been found.

If the current process was unable to find a mutually workable solution, the possibilities that existed offshore may, therefore, lie untapped for decades to come and the huge potential benefit to the country could remain unrealised, he concluded.

Perilous uncertainties

A briefing by the Offshore Petroleum Association of South Africa (OPASA) was made by the acting chairperson, Vusumuzi Sihwa, who re-iterated that the oil and gas exploration environment was challenging environment; high risk; had a surprisingly low success rate with a massive capital outlay to explore a hostile offshore environment such as the East Coast of Africa; and with no guarantee of commercial success.

South Africa’s potential resources, coupled with the current legislation, encouraged the industry to take these huge risks but the MPRDA Bill created “perilous uncertainty for the industry” through lack of stability, uncertainty, coupled with added confusion through the disbandment of PASA.

Sihwa said oil and gas companies could simply shift their focus to other global opportunities.  He suggested that a full working group of all stakeholders, not just some, be convened before the President signed the Bill and the group engage meaningfully and in good faith to reach a mutually agreeable way forward.

OPASA recommended that an upstream petroleum regulator be retained as one unit in one location.

Changing playing fields

Under questioning, the company said existing regulations and the operating environment were very favourable, which was why almost all the prospecting blocks were taken up. The current amendments had brought an element of uncertainty to the table; “the rug was being pulled from under the feet of the industry and this was now a worry, especially whilst projects were in process.” Companies had come into South Africa in terms of a set of rules which were now being decisively altered, he said.

With regard to the liquid fuels charter, OPSA complained that they have never been part of any matters involving mining charters and it was incorrect to impose regulations historically from one industry upon another industry.

Unintended consequences of Bill

sasolIn a separate presentation, Sasol, represented by Johan Thyse, said that Sasol was different to many in the oil and gas industry as it was present throughout the value chain. Consequently government policy and regulation affected the company extensively. Thyse warned the chairperson that the Bill, as it stood, would have serious unintended consequences for both industries.

He said the proposals if left unchallenged would severely affect Sasol’s ability to execute its strategy in South Africa and play its role in the National Growth Path and in the National Development Plan.

Sasol commented in detail on issues surrounding free carried interest and also the mining charter as compared with the liquid fuels charter; the concept of “concentration of rights” which they were highly critical of; the transfer of petroleum licencing; what was referred to in the Bill as regional regulators; the disbandment of PASA and beneficiation as it affected Sasol.

Environmental off beam

They were particularly and deeply concerned regard environmental management issues proposed and the authorisation of issues surrounding increasing the extent of a mining rights through amendments; the removal of prescribed time-frames on many issues and the matter of redefinition of strategic minerals and any consequent effect upon on exports.

Under questioning Sasol said there was total lack of clarity on many issues. Coal for example did not follow cadastral boundaries on the issue of rights as did maritime resources and there was confusion on beneficiation targets and time-frames as to whom and what it applied to.

When asked whether the Bill, with its uncertainties and bearing in mind Sasol’s stakeholders and shareholders, would make it easier or harder to operate in South Africa Thyse replied that “due to the lack of clarity on investment in the Bill, Sasol certainly would re-look at how and where it would invest.”

Investment climate threatened

shellJan W Eggink, Upstream General Manager, Shell SA, said their primary concern where matters equity ownership provisions in the mining charter and how this would the affect investment climate. He said that his company fully supported government’s B-BBEE agenda and matters related to a state interest in the petroleum and mining industry but he needed clarity on whether mining, offshore gas exploration on BEE issues could possibly be combined under one set of rules in view of their disparity.

Under questioning, Egglink called for “more constructive engagement with government” on the combining of matters affecting both the mining and onshore gas industry”.  His overall opinion was that it was difficult to say much on the MPRDA without any knowledge of how any regulations might work.

It was after the Shell presentation, that it was announced by the chair that the PetroSA submission had been withdrawn although the absence from the hearings had been noticeable.

Refer previous articles in this category
http://parlyreportsa.co.za//bee/mprda-bill-causes-contention-parliament/
http://parlyreportsa.co.za//uncategorized/mineral-and-petroleum-development-bill-grabs-resources/
http://parlyreportsa.co.za//energy/draft-mprda-bill-for-comment/

Posted in BEE, Energy, Enviro,Water, Facebook and Twitter, LinkedIn, Trade & Industry0 Comments

CEF still has its troubles

CEF subsidiary SASDA faces closure

Reporting under the Central Energy Fund label during parliamentary presentations to the portfolio committee on energy, the South African Supplier Development Agency (SASDA) admitted that in incurring a loss of over R18m during 2011/12 and a loss estimated at R14.5m for the present year, shutdown or liquidation was inevitable.

Lunga Saki, acting CEO, said the situation had become untenable.

He described SASDA as the “driving force behind the liquid fuels charter” but that SASDA, with dwindling cash reserves and with CEF “having insufficient dividend flows from subsidiaries” had put tremendous pressure on SASDA’s ability to continue its work, funding for which at present existed as loans from the central group.

Directors anxious to resolve

CEF had said that as a body it was to approach the department of energy and industry players such as SAPIA on the future of SASDA.  A possible liquidation was on the books, since the directors of SASDA did not want to enter the realm where they, knowing that SASDA had liabilities which exceeded its assets, could be accused of reckless trading and SASDA receiving qualifications from the auditor general with them at the reins.

SASDA focused on mentoring and coaching, providing technical support, skills training, facilitated access to raw materials, project management and they claimed facilitated financial support to CEF projects.

General picture

Sizwe Mncwango, CEO of CEF, in reporting to Parliament on overall group activities, excluding that of subsidiary PetroSA which in view of its size and structure reported separately, said he would focus on the work of CEF excluding this

CEF was in the process of restructuring for growth, he said. He saw the group as contributing to national security of energy supply dealing in renewables, oil and gas, strategic storage, licencing, mining development projects and supplier development issues within the energy field.

In clean energy, CEF’s project at Solar Park had a mission of developing renewable energy and low smoke fuel projects and agreements for solar water heaters had been signed in cooperation with the departments of human settlements and energy. Their second phase of this successful project was about to start. Photovoltaic (PV) manufacturing was being investigated.

Strategic stocks

On strategic stocks and storage facilities the company stored and managed third party crude oil on a commercial basis in order to fund the oil pollution prevention and control activities at the Saldanha Bay, Milnerton and Ogies facilities. There was a major project which included office refurbishment at the Milnerton Tank Farm, with tank refurbishment being undertaken with more sourcing of additional strategic stock tanks required.

A warning was given that the oil pollution sea vessels were aged and the fleet was urgently in need of refurbishment.

David Van Der Spuy, acting general manager at the Promotion Petroleum Agency South Africa (PASA), explained to parliamentarians the implication  of section 71 of the Mineral and Petroleum Resources Development Act (MPRDA) on the need to promote onshore and offshore exploration and production of petroleum, monitor and report regularly to the Minister in respect of compliance on permit, rights and licensing.

PASA faced a funding problem, he said, but the regulation of MPRDA remained an imperative and could not be threatened.

CEF coal venture

CEF also reported on its small coal mining venture at Vlakfontein, Mpumalanga, run by a subsidiary African Exploration Mining and Finance (AEMFC) which amounted to a pilot development and which was successfully mining 1.5m tons of coal, with no fatalities.

This financed a mining exploration venture known as Pan African Minerals Development Corporation (PAMDC and was driving PAMDC’s additional coal exploration programme. CEF investments shareholding in PAMDC was 33.3%, AEMFC being a 49% participant at project level but the group was searching for third party funding to hive the project off and engagement with the department of mineral resources was positive.

Sizwe Mncwango told parliamentarians that this was the main objective of CEF in building successful energy participants and letting them flourish on their own, once identified as a successful participants in the energy environment

PetroSA a separate issue

Such was the case with PetroSA, a part of CEF, who would report to Parliament in their own right, Mncwango said.

On questioning it became clear that, aside from the SASDA problem, much of the focus on the balance sheet had been in the creation of loans and funding for PetroSA. Consequently CEF, other than certain mandates such as that retained by PASA in licensing and oil spillage, was mainly involved in support programmes, skills development and sustainability of projects which involved the state’s drive to make contributions in the energy field.
Associated articles archived
http://parlyreportsa.co.za//uncategorized/central-energy-fund-slowly-gets-its-house-in-order/

 

Posted in Energy, Finance, economic, Fuel,oil,renewables, Labour, Public utilities0 Comments

MPRD Amendment Bill to be tabled early 2013

MPRD Amendments will cause heat in oil industry…..

susan shabanguNot yet scheduled for meetings by committees or hearings dates in Parliament, is the draft Mineral and Petroleum Resources Development Amendment Bill for which mineral resources minister, Susan Shabangu, obtained cabinet approval for in early December last year and who  called for public comment on the draft by the end of January 2013.        With a problematic preamble which states that the draft Bill is to promote the concept that “that the nation’s minerals are developed in an orderly manner while promoting justifiable social and economic development”, certain sectors have already provoked considerable industry comment which were presumably have been conveyed in comments to the minister and her department as called for when gazetted.

Amongst the many “refined existing definitions”, the draft Bill as it stands at present and possibly to be tabled seeks to allow the state to acquire by right of ownership any mineral resource to a “free carried interest” in any exploration matter and a right to acquire “a further interest” in that exploration with also production rights “through an organ of state or state owned company”.

Changes are also proposed on the issue of ministerial limitations on the ability of mining companies to trade JSE shares on the open market.

PASA to go

The disbanding of the Petroleum Agency of South Africa appears to be on the cards as well, since the draft Bill clearly relegates all functions of this agency to the department of mineral resources (DMR) and much of the work undertaken with and by DMR will now be allocated under the Geosciences Act, other work passing from DMR to fall under the National Environmental Management Act and therefore bringing in a further department.

“Technically, therefore, government departments would become a petroleum regulator”, was the comment by the Offshore Petroleum Association of SA in the Johannesburg press. However, clarification of this and the situation with regard to PetroSA and the acquisition of exploration rights will presumably emerge during parliamentary hearings since submissions so far in terms of the gazetted document are naturally private.

The draft Bill also contains a great number of changes and redefinitions in the area of associate minerals affecting a broad spectrum of the mining industry. However, in particular the draft states that it proposes to “make provision for the implementation of the approved beneficiation strategy through which strategic minerals can be processed locally for a higher value”. The ability of the minister to set those beneficiation levels and any prices seems to be incorporated.

This specifically will bring focus upon the benefits from tailings in mine dumps, meaning that not necessarily the owners that created them originally will be the sole beneficiaries of subsequent workings. On this subject, the Bill also calls for a new description or interpretation of the word “beneficiation”, this to be inserted into the anchor legislation, the MPRDA itself, by amendment.

Regional mining developmental bodies and environmental committees regarding MPRDA matters are to be set up under the jurisdiction of DMR, such bodies having regional managers with powers.

What effect any submissions have will been seen from the document that is eventually tabled.

Posted in Energy, Fuel,oil,renewables, Justice, constitutional, Mining, beneficiation, Public utilities, Trade & Industry0 Comments


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