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Mprda hearings   saoga submission - 17 september 2013(final)
Mprda hearings   saoga submission - 17 september 2013(final)
Mprda hearings   saoga submission - 17 september 2013(final)
Mprda hearings   saoga submission - 17 september 2013(final)
Mprda hearings   saoga submission - 17 september 2013(final)
Mprda hearings   saoga submission - 17 september 2013(final)
Mprda hearings   saoga submission - 17 september 2013(final)
Mprda hearings   saoga submission - 17 september 2013(final)
Mprda hearings   saoga submission - 17 september 2013(final)
Mprda hearings   saoga submission - 17 september 2013(final)
Mprda hearings   saoga submission - 17 september 2013(final)
Mprda hearings   saoga submission - 17 september 2013(final)
Mprda hearings   saoga submission - 17 september 2013(final)
Mprda hearings   saoga submission - 17 september 2013(final)
Mprda hearings   saoga submission - 17 september 2013(final)
Mprda hearings   saoga submission - 17 september 2013(final)
Mprda hearings   saoga submission - 17 september 2013(final)
Mprda hearings   saoga submission - 17 september 2013(final)
Mprda hearings   saoga submission - 17 september 2013(final)
Mprda hearings   saoga submission - 17 september 2013(final)
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Mprda hearings saoga submission - 17 september 2013(final)

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The South Africa Oil and Gas Alliance submission to the MPRDA hearings on the Oil and Gas Industry on 17 September 2013

The South Africa Oil and Gas Alliance submission to the MPRDA hearings on the Oil and Gas Industry on 17 September 2013

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  • 1. Public Hearings on the Mineral and Petroleum Resources Development Amendment Bill [B15-2013] Presented by Ebrahim Takolia CEO Wednesday, 18 September 2013 12h00 to 12h30
  • 2. SAOGA – Who do we represent? © 2013 South African Oil & Gas Alliance 2 The South African Oil & Gas Alliance represents its members and industry in the Upstream and Complimentary Midstream Sectors of the Oil & Gas Value Chains Marketing Crude Oil Value Chain Exploration Transportation Refining • Geophysical Evaluation & Design • Field Development • Drilling Operations • Bringing the oil to the surface • Gathering and transporting – pipelines, tankers, trucks • Fractionation of crude oil into petroleum products • Product Blending • Retailing • Trading UPSTREAM MIDSTREAM Oilfield Services • Contract Drilling • Drilling Related Services & Techniques • Production & Maintenance Production DOWNSTREAM End UsersExploration Processing Transportation & Storage • 3D Seismic • Geophysical Evaluation & Design • Drilling Operations • Bringing the gas to the surface • Field Development • Continuing drilling operations • Gathering & Processing • Fractionation • Transportation (pipelines) • Storage • Liquefaction (for tanker transport) • Industrials • Power Generation • Utilities – Residential and Commercial loads UPSTREAM Gasfield Services • Contract Drilling • Drilling Related Services & Techniques • Production & Maintenance Production DOWNSTREAM Natural Gas Value Chain MIDSTREAM
  • 3. How are we Constituted? • Not for profit organisation • Funding from government and members • Represent private and public sectors • Represent the oil and gas industry and its interests primarily in the Upstream and Complimentary Midstream sectors © 2013 South African Oil & Gas Alliance 3
  • 4. South Africa is well located to take advantage of Oil & Gas activities in South Africa and regionally in West and East Africa. Legislation that supports local Upstream and Midstream industries can lead to the creation of a vibrant, thriving Oil & Gas sector with a value chain that contributes more to the South Africa economy in ten years than the mining sector. © 2013 South African Oil & Gas Alliance 4 Potential for an Oil & Gas Hub in South Africa South Africa needs favourable policies to enable a sustainable local industry that will facilitate the creation of a oil and gas hub in South Africa
  • 5. South Africa is Well Positioned to Play a Hub Role © 2013 South African Oil & Gas Alliance 5 Sophisticated Economy & Infrastructure • Largest, most sophisticated economy in Africa – diverse industrial base • Excellent transportation and communications infrastructure • Strong financial and legal system supports “first-world” business environment. Strategic Position & Regional Linkages • Part of Africa – leading player in African Union, SADC and SACU • Strategic position as East and Southern Africa upstream adds to the West African success. • De facto logistics and transport hub for sub-Saharan Africa – Johannesburg effectively the regional commercial capital. Strong Human Capital Base • Diverse population • Young, trainable workforce • Predominantly English speaking • World-class universities and business schools. Highly attractive environment & lifestyle • Great climate and general standard of living for expatriate personnel. • High quality education and medical care. • Vibrant cultural and recreational life.
  • 6. South Africa – Offshore Potential © 2013 South African Oil & Gas Alliance 6 SOUTH AFRICA Cape Town Durban ORANGE BASIN TUGELA BASIN BREDASDO RP BASIN Mossel Bay Area • Mossgas Synfuel Refinery • Current production nearing end of life (PetroSA ) • PetroSA FO Field development started recently ($1bn) • Block 11B/12B exploration area – large oil potential (CNR) Orange River Basin • Kudu gas discovery in Namibia (Tullow) • Ibhubesi gas discovery (Forest, Sunbird, Petro SA) - 200m WD/planned 100-200mmscfpd • Active DW/SW exploration for gas & oil targets (BHP, PetroSA). Tugela Basin • Immature exploration play • 4 wells – indications of oil system Kudu Ibhubesi Today: 20 companies 36 permits/rights/applications
  • 7. South Africa – Onshore Potential © 2013 South African Oil & Gas Alliance 7 Technical Cooperation Permits • Falcon Oil and Gas Ltd. (30,000 km2) along the southern edge of the Karoo basin. • Shell (185,000 km2) surrounding Falcon’s TCP. • Sunset Energy (4,600 km2) to the west of Falcon’s TCP. • The Sasol/Chesapeake/Statoil JV (88,000 km2) to the north and east of Shell’s TCP. • Anglo Coal (50,000 km2) to the north and east of Shell’s TCP. Companies are expected to begin exploration activities. Should the deposits prove to be economically viable, initial studies will focus on environmental and social impacts. Shale Gas Exploration UCG (Underground Coal Gasification) & CBM (Coal Bed Methane)South Africa is ranked 8th in terms of shale gas potential with 390 trillion cubic feet of recoverable resources. Proved Reserves % World South Africa ~30 Billion Tonnes 3.3% Global Total ~861 Billion Tonnes Estimates Resources South Africa ~150 Billion Tonnes Botswana ~202 Billion Tonnes Mozambique ~20 Billion Tonnes Africa Coal Resources South Africa has the largest proven coal reserves in Africa. Recent discoveries of large scale coal deposits have been made in Botswana and Mozambique. Coal Resources: >300 000 Mt Coal Reserves: >50 000 Mt Sources: EIA, PA South Africa, 2010, USGS, 2000
  • 8. South Africa – Refineries © 2013 South African Oil & Gas Alliance 8 105,000 bbl/d crude 125,000 bbl/d 150,000 bbl/d 45,000 bbl/d/ce SAPREF 180,000 bbl/d NATREF 108,000 bbl/d 50% 50% 36% 64% Production from offshore and onshore oil and gas discoveries can support investments to improve technologies in current refineries and the development of new GTL refineries in South Africa, significantly improving South Africa’s energy security
  • 9. South Africa – Port Infrastructure © 2013 South African Oil & Gas Alliance 9 Port of Cape Town Port of Saldanha Bay Port of Coega • New deep water port ~20m • Surrounded by free zone • Northern edge of Port Elizabeth • O&G development not currently planned here • Sturrock dry dock – 360m length, 45m width, 13.7m depth over entrance. • Repair quay - 457m with 12m draft. • A-Berth O&G repair/ fabrication facility • 120km (60-90min drive) northwest of Cape Town. • Depth up to 21.5 metres. • Existing O&G fabrication yard. • Strong ship repair capability. • Engineering & fabrication Port of Durban
  • 10. Cape Town has long been a centre for oil and gas repair, maintenance and fabrication work © 2013 South African Oil & Gas Alliance 10
  • 11. South Africa’s East Coast is becoming more attractive as East African activity increases © 2013 South African Oil & Gas Alliance 11
  • 12. © 2013 South African Oil & Gas Alliance Fabrication Yard Multi-purpose Quay Mossgas Quay Government and industry are focusing on establishing an Oil & Gas Services complex at Saldanha Bay
  • 13. An Industry Invested in the Future • The upstream and complimentary midstream industries are invested in the future and require a favourable policy outcome to ensure that those investments deliver sustainable returns • There are various government and public / private sector partnerships that have already invested in various projects to facilitate the growth and development of the Upstream and Midstream Sectors – Saldanha Bay IDZ – Fabrication yard at Saldanha Bay – A Berth Facilities at Cape Town Harbour – COEGA • Initiative by Oil Companies – Oil Spill Pollution Response (First and Only one in Africa) © 2013 South African Oil & Gas Alliance 13
  • 14. Recent Oil & Gas Value Chain Activity • Many large corporations have set up or are considering setting up offices in South Africa based on the expectation of a favourable investment climate and policy stability • Foreign direct investments have been made into South Africa with the acquisition of local industry players based on the expectation of a favourable investment climate and policy stability • New companies have entered the Oil & Gas value chain © 2013 South African Oil & Gas Alliance 14
  • 15. Legislation Appropriate to the Level of Industry Development © 2013 South African Oil & Gas Alliance 15 IndustryMaturity 1970s 1980s 2000s 2013 Mining Industry in South Africa Oil & Gas Industry in South Africa
  • 16. Comments (1) 1. Transfer of petroleum exploration and production licensing functions to the Regional Managers Section 45 of the proposed Bill seeks to amend section 70 of the MPRDA by removing the provision for a ‘Designated Agency’ to perform the promotional, regulatory and data management functions for petroleum exploration and production. Section 71 and other consequent provisions of the MPRDA are to be amended accordingly. The Regional Managers of the Department of Mineral Resources shall, in terms of the Bill, be vested with the performance of these functions. Of particular concern in this regard is the following: 1.1 Capacity-building and skills-transfer in the Regions The government has vested the Petroleum Agency with the capacity to promote and regulate the upstream petroleum exploration and production sector, and accordingly designated it with the functions provided for in Section 71 of the MPRDA. Consolidating and assigning such functions to a dedicated state entity is in keeping with international practice. In the event of delays or failure to transfer such skills to the Regional Offices of the DMR, the upstream petroleum sector will be negatively affected, inter alia, with respect to delays in the processing of licenses and the quality of resource evaluation and geo-technical data management. © 2013 South African Oil & Gas Alliance 16
  • 17. Comments (2) Of particular concern in this regard is the following (continued): 1.2 Alignment of Cross-border exploration fields Most petroleum exploration and production projects, especially offshore, stretch over more than one region of the DMR per project. We note in this regard that section 4 of the draft Bill provides for the Minister of Mineral Resources to divide the continental shelf to be in alignment with the geographic areas of jurisdiction of the Regional Managers of the DMR. A single State entity, as South Africa currently has, dealing with the receipt and processing of applications, data acquisition and management, monitoring of exploration and production projects, ensures coherent and consolidated reports and feedback to the principals in Government, the community, and to the industry. 1.3 A Single Designated Agency as one port of call The concept of the single ‘Designated Agency’ provided for in section 70 of the MPRDA (Act 28 of 2002) provided for a single ‘port of call’ for all promotional information, geo-technical data management services, and licensing approval processes – which further provided for consistency in the provision of such services. Different regions of the DMR will naturally operate on different timelines in accordance with their workloads and priorities. This will have a negative and discouraging effect on applicants, licence-holders and their investor principals. © 2013 South African Oil & Gas Alliance 17
  • 18. Comments (3) Of particular concern in this regard is the following (continued): 2. Prescribed periods for the processing of applications We note that while the MPRDA prescribed the relevant regulatory time periods, the draft Bill removes this prescription and provides for the Minister to provide for such timelines elsewhere. We wish to register that it is important for investors and communities alike to have a measure of certainty about the timelines within which to expect performance by government and/or government agencies. In the event that the timelines referred to above are successfully removed from the MPRDA, we trust that they will be provided in the Regulations. This will assist in providing certainty, transparency and confidence in the system. 3. Invitation for Applications We agree with the insertion of paragraph 2A in section 73 of the MPRDA which imposes an immediate moratorium on any acreage whose license has been cancelled, relinquished, abandoned or has lapsed, to ensure that subsequent applications are dealt with in a transparent system of application by invitation. © 2013 South African Oil & Gas Alliance 18
  • 19. Comments (4) Of particular concern in this regard is the following (continued): 4. Application of the Amended Broad Based Socio Economic Empowerment Charter for the South African Mining and Minerals Industry to the Petroleum upstream sector. Section 55(b), read with section 55(f) and section 59(c) of the draft Bill raises a number of questions. In view of the extent of capital investment necessary in oil and gas exploration and production projects, and the current level of known oil and gas resources in South African acreage makes South Africa a high risk area as an international investment destination. Certainty in the terms of licensing agreements for both exploration and production is thus essential for investment modelling and decision- making by potential investors. It will therefore be critical to the development of the sector that the following provisions on the following be given more clarity: (a) The terms of the enforcement of BEE participation; (b) the parameters of the State’s right to a free carried interest in all new exploration, and all new production rights; and (c) the parameters of the option to acquire a further interest through a designated organ of State or State-owned entity. © 2013 South African Oil & Gas Alliance 19
  • 20. Comments (5) Of particular concern in this regard is the following (continued): 5. Concentration of Rights While the logic behind the requirement in section 55 of the draft Bill, discouraging the potential concentration of rights under the control of a single applicant, is supported, there remains the need to provide for the criteria to be applied in determining such concentration. 6. Relinquishment of portion of right at applying for renewal To ensure certainty and transparency, it is also necessary to provide for the parameters to be applied in determining the extent of the portion to be relinquished at applying for a renewal. 7. Option to Appoint Two Directors on the Boards of Various Licence Holder Companies This will create a conflict of interest related to the fiduciary duty of a director to act in the interest of the company. © 2013 South African Oil & Gas Alliance 20

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