This document provides an overview of South Africa's regulatory framework for natural gas. It outlines the key legislation and policies governing the country's gas industry, including the Gas Act which establishes the regulatory framework. It also discusses the role of the National Energy Regulator of South Africa (NERSA) in regulating gas transmission and prices. Bilateral agreements with neighboring countries around natural gas trade are also summarized.

1. S A G A S R E G U L AT O R Y
F R A M E W O R K A N A LY S I S

2. S O U T H A F R I C A
R E G U L AT O R Y
O V E R V I E W
• The Natural Gas Regulatory
Framework establishes policies
for the commercialisation of
natural gas in existing and new
concessions
• This section provides an
overview of the main legislation
and regulatory framework
regulating South Africa's natural
gas industry
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3. E S T A B L I S H E D
R E G U L A T O R Y
F R A M E W O R K
• The Gas Act provides regulatory framework for the construction
and operation of gas transmission, storage, distribution,
liquefaction, and re-gasification facilities, as well as gas trade
• The Draft Gas Amendment Bill is supportive and facilitative of
investment in development of integrated energy projects, including
gas-to-power projects
• The Bill will largely introduce a mechanism that allows the Minister
of Mineral Resources and Energy to direct the development of
new gas infrastructure including pipelines, storage, and
regasification facilities for imported liquefied natural gas
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4. G A S R E G U L AT O R
• The National Energy Regulator of South Africa is
responsible for the regulation of gas
• In addition to being the competent licencing authority
for the Petroleum Pipelines Act and the Gas Act ,
NERSA regulates the electricity, piped-gas, and
petroleum pipeline industries
• NERSA is tasked with monitoring and approving
pipelined gas transmission and storage facilities, but
not with regulating distribution tariffs

5. N AT I O N A L G A S
P O L I C I E S
• Petroleum resources are the property of
the nation, and the State, represented
by the Minister of Mineral Resources
and Energy, is charged with regulating
and promoting petroleum development
in South Africa
• The Minister of Mineral Resources and
Energy has the authority to grant or
deny requests for reconnaissance
permits, technical cooperation permits,
exploration rights, and production rights,
as well as to initiate "licencing rounds."
• The Petroleum Agency of South Africa is
charged with promoting and regulating
petroleum exploration, exploitation, and
production

6. E N A B L E R S
• In South Africa, the fiscal regime
applicable to the upstream gas
industry consists predominantly of
corporate income tax and royalties
• The Tenth Schedule to the Income
Tax Act addresses the taxation of
upstream exploration and
production activities and contains
tax provisions that are favourable
to gas companies
• The Carbon Tax Act seeks to
impose a tax on the carbon dioxide
equivalent of greenhouse gas
emissions and offers substantial
tax-free emission allowances

7. E S T A B L I S H E D
B I L A T E R A L
A G R E E M E N T S
• Mozambique and South Africa have signed a bilateral
investment treaty and a cross-border gas trade
agreement
• A bilateral trade agreement was inked between
Namibia and South Africa in 2003 to facilitate natural
gas trade
• South Africa and Zimbabwe terminated their bilateral
trade agreement on November 20, 2018, and are
now trading under the SADC Free Trade Area
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8. E S T A B L I S H E D
B I L A T E R A L
A G R E E M E N T S
• Environmental legislation is of particular
importance, but compliance with environmental
regulations : Environmental Impact Assessment
Regulations) can be a barrier to entry due to the
time and expense required to fully comply with
the requirements, as well as additional municipal
and national authorisation requirements based on
the Spatial Planning and Land Use Management
Act

9. R E G U L AT O R
Y
R E Q U I R E M E
N T S F O R
L N G I M P O R T
P R O J E C T S
I N T E R M S
O F T H E G A S
A C T, 2 0 0 1
In accordance with section 15 of the Gas Act, no
person may, without a licence issued by the Energy
Regulator
Section 16 of the Gas Act prescribes the form and
manner in which the licence applications must be
submitted, and section 16 prescribes the
information that must be included in the licence
application
The types of licences required in terms of the Gas
Act for the different LNG import facilities and
related infrastructure are provided in Table 1 below
Further details are provided in the Gas Act Rules,
2009 attached here as Appendix B. Table 3 below
demonstrates how NERSA operationalises some of
these requirements

10. R E G U L AT O R
Y
R E Q U I R E M E
N T S F O R
L N G I M P O R T
P R O J E C T S
I N T E R M S
O F T H E G A S
A C T, 2 0 0 1
In accordance with section 15 of the Gas Act, no
person may, without a licence issued by the Energy
Regulator
Section 16 of the Gas Act prescribes the form and
manner in which the licence applications must be
submitted, and section 16 prescribes the
information that must be included in the licence
application
The types of licences required in terms of the Gas
Act for the different LNG import facilities and
related infrastructure are provided in Table 1 below
Further details are provided in the Gas Act Rules,
2009 attached here as Appendix B. Table 3 below
demonstrates how NERSA operationalises some of
these requirements

11. R E G U L AT O R
Y
R E Q U I R E M E
N T S F O R
L N G I M P O R T
P R O J E C T S
I N T E R M S
O F T H E G A S
A C T, 2 0 0 1
• Section 28 of the Gas Act requires that owner of
an operation involving any of the following
activities must register the operation with the
Energy Regulator
• The importation of LNG via ISO containers,
fixed LNG terminal or FSRU should be
registered in terms of section 28 of the Gas Act
• The form and manner for submission of the
registration applications is outlined in the Gas
Act Rules
• Subsequent to registration, registrants would be
required to submit annual information regarding
their activities to NERSA in terms of Regulation
9 of the Piped Gas Regulations

12. R E G U L AT I O N O F TA R I F F S
I N T E R M S O F T H E G A S A C T

13. S C O P E F O R
T H E
R E G U L AT I O N
O F TA R I F F S
THE GUIDELINES PROVIDE
FOR A MENU OF SIX
METHODOLOGIES AS
FOLLOWS
RATE OF RETURN AND
DISCOUNTED CASH FLOW
METHODOLOGIES USED FOR
APPROVING TARIFFS SINCE
MORE DETAILED
INFORMATION ON THE
GUIDELINES IS PROVIDED IN
APPENDIX C

14. R E G U L AT I O N
O F G A S
P R I C E S I N
T E R M S O F
T H E G A S A C T
SCOPE FOR REGULATION OF GAS
PRICES
A PRICE IS USED TO DETERMINE THE
PRICE FOR THE GAS MOLECULE ONLY
SECTION 21 OF THE GAS ACT PROVIDES
THAT NERSA SHOULD REGULATE PRICES
IF THERE IS INADEQUATE COMPETITION
AS CONTEMPLATED IN CHAPTERS 2 AND
3 OF THE COMPETITION ACT
NERSA HAS DEVELOPED A NEW
METHODOLOGY TO APPROVE MAXIMUM
PRICES FOR GAS IN SOUTH AFRICA

15. M E T H O D O L O
G Y F O R
A P P R O V I N G
M A X I M U M
P R I C E S F O R
G A S F O R
R E G U L AT I O N
• This is the price of the gas energy at the point of
its first entry into the transmission / distribution
system
• Competitive benchmarks used are US Henry Hub,
UK National Balancing Point and Dutch TTF
• New entrants
• Traders along the value chain after gas’ first entry
into the transmission, distribution system
• The relevant maximum price benchmark will be
the Japan/Korea Marker

16. N O N -
D I S C R I M I N A T I
O N
P R O V I S I O N
• The Gas Act further requires NERSA to monitor
that licensees are not unfairly discriminating
when they charge prices to their customers
except for objectively justifiable and identifiable
differences
• The section further states that the prohibition of
discrimination applies to actions by licensees in
favour of their related undertakings in particular
• This provision may be interpreted to mean that
if the LNG supplier sells gas to the market, it
may have to sell using an objective mechanism