SA proposes 20% carried interest in oil and gas law

South Africa published a long-anticipated draft of oil and gas legislation that will give the state a 20% carried interest in exploration and production rights, with the aim of increasing development of the industry.

The policy also calls for at least a 10% participating interest by black partners and the establishment of a Petroleum Agency, according to a draft published Tuesday by the Department of Mineral Resources and Energy in the Government Gazette.

The bill separates rules for the petroleum resources sector from laws that apply to mining exploration. Companies including Royal Dutch Shell have slowed activity in recent years, citing legislative uncertainty. Finalising the oil law has also become more urgent since Total SA announced the first significant deep-water discovery off the coast of South Africa in February.

South Africa will have a right to a 20% carried interest that “shall not be recoverable at exploration and appraisal stage,” according to the draft. “The holder of a production right shall recover development and production costs from the proceeds generated from production operations as prescribed.”

Interested parties have until February 21 to submit comment on the draft bill.

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