ExxonMobil warns SA on minerals act
CAPE TOWN — The world’s largest nongovernment-owned oil company, ExxonMobil, has warned Parliament that the proposed changes to the Mineral and Petroleum Resources Development Act would make SA less attractive for investment in its fledgling oil and gas sector.
Yesterday was the first of four days of public hearings scheduled by Parliament’s mineral resources committee, which is considering the proposed amendments to the act.
The main objectives of the amendments are to clarify ambiguities in the original act that was passed by Parliament in 2002.
The amendments also seek to promote beneficiation of raw minerals, to allow the minister of mineral resources to declare certain mineral resources as strategic and to allow for an increase in government ownership of companies or projects.
Other aims of the amendments are to boost job creation and to secure supplies, especially of coal, that could be deemed essential for running the economy.
Among the proposals is that government would be allowed to appoint two directors to boards of companies as a means to monitor their compliance with the new law.
Speaking before the mineral resources committee yesterday ExxonMobil’s GM for SA Russ Berkoben made it clear SA’s potential offshore oil and gas reserves were possibly located in some of the most dangerous seas in the world and this entailed significant exploration risks.
Therefore, he said, the fiscal and regulatory terms had to be as attractive as possible to encourage investment in the sector, otherwise companies would rather go to other countries that had far more accessible resources and simpler laws.
“Simply said, taking a risk with all the unknowns, SA has to have very attractive fiscal and regulatory conditions,” he said.
ExxonMobil’s submission to Parliament states that it wants the entire oil and gas sector to be exempted from the amendments to the Mineral and Petroleum Resources Development Act.
The rules were acceptable, said Mr Berkoben, but he pointed out the proposed changes would, if implemented, either slow down or stop exploration for offshore oil entirely.
His main concerns were the proposed requirement that the government should appoint at least two directors to company boards; that the oil and gas sector would be subjected to unknown beneficiation requirements; and that the stake for black economic empowerment would be raised to 26% from 10%.
Another problem with the proposals was the dissolution of the oil and gas regulator, the Petroleum Agency SA, and the takeover of its functions by Department of Mineral Resources regional offices.
“We seek countries that have a central regulator … as this allows us to get exploration to start as quickly as possible,” Mr Berkoben said.
ExxonMobil and Royal Dutch Shell have stakes in some of SA’s offshore oil blocks, but exploration and development have yet to take off. The government has granted ExxonMobil permission to explore in one deepwater exploration right and three other rights are awaiting government approval.
Mr Berkoben said the belief that SA had offshore oil reserves was based simply on concepts and ideas. “Just like any other scientific theory we have to drill wells to find out what’s there.”
It would cost hundreds of millions of dollars to drill exploration wells with huge risks that the state and other participants do not share, Mr Berkoben said.
It was 10 years ago that the last “wildcat” or exploratory wells were drilled off the South African coast, Mr Berkoben said. Most of SA’s offshore exploration amounted to drilling wells in less than 500m of water depth.
However, because of the geological structure of SA’s sea shelf, exploration would mean drilling a number of wells of more than 500m deep and this would add substantially to the cost.
Acting chairwoman Faith Bikani said that the committee had received about 80 submissions which all added up to more than 600 pages and due to the number of presentations the committee would be extremely strict on time.
Presentations were heard from ExxonMobil, Anadarko Petroleum Corporation, onshore and offshore petroleum associations and agriculture association AgriSA.