Another new state-owned company for South Africa a step closer to reality

 ·27 Oct 2023

The National Assembly has passed the Upstream Petroleum Resources Development (UPRD) Bill, which will create yet another state-owned company.

The Bill seeks to separate the petroleum provision from the mineral provision, as seen in the Mineral and Petroleum Resources Development Act (Act No. 28 of 2002). This separation will create two separate pieces of legislation for the industries.

This split will also create a new regulatory environment for South Africa’s gas industry, which has been touted as a crucial “transition” energy source.

The Bill will also for the establishment of a new state-owned company, which will be responsible for managing the state’s participation at 20% carried interest in all petroleum rights.

It also states that the Petroleum Agency of South Africa will be the regulator for the upstream of the petroleum sector while also giving provision for the participation of black persons in petroleum rights on commercial terms.

The Chairperson of the Portfolio Committee on Mineral Resources and Energy, Mr Sahlulele Luzipo, said that he is confident that the National Council of Provinces will pass the Bill before it heads to the President for assent.

Major issues

Although gas is seen as a “cleaner” form of energy than coal, Paul Wani Lado, an attorney at the Centre for Environmental Rights, said that the exploitation of gas can still contribute to global warming through the release of methane.

“Methane is a potent greenhouse gas. Over a 20-year period, it has an 84 times higher global warming potential than carbon dioxide,” he said.

“Although gas companies claim to be able to limit the impact of methane, methane leakages during numerous phases in the gas supply chain can be anywhere between 2.8 – 7.9%. It is estimated that even a 2.7% methane leakage would negate any climate benefits that gas has over coal.”

He added that South African communities are unlikely to see any major economic benefits while major gas and mining companies make massive profits. South Africans will also carry the health risks – such as increased mortality and morbidity – and economic consequences from extraction.

“While the bill speaks about expanding opportunities for black people and promoting local employment, it is silent on how it will alter an exploitative extractives industry where mining and gas companies often win against disadvantaged local communities in a cruel zero-sum game,” he said.

“Experience has shown that people in local communities where gas companies operate are often not eligible for employment by them. The Bill makes no provision for a social and labour plan, nor any alternative mechanism for the benefit of local communities.”

The UPRD Bill can be found here.

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