Assessment of the Upstream Sector in
the Oil and Gas Industry
Mr. Muzi W. Mkhize
Chief Director : Hydrocarbons Policy
E-mail: [email protected]
Tel: 012 406 7570/1
1
SCOPE
The Department of Energy seeks to brief the
Committee on the following subject:
• Creation of an enabling environment – the role of
Government:





Status quo from a government perspective;
Current government programmes in oil and gas industry;
How has the private industry responded;
What the future holds for the industry; and
Promote access to gas in an affordable and safe manner.
2
KEY CHALLENGES
Lower
Consumer Prices
& Input Costs
Security of
Supply
HDSA
Empowerment
A difficult balancing act
3
•
•
BACKGROUND
Pre-2001 gas industry was not regulated whereas the downstream
petroleum industry was regulated through the Petroleum Products Acts,
1977 (Act No. 120 of 1977);
The White Paper on Energy Policy of 1998 was adopted to, amongst others,
ensure:


•
Security of energy supply through diversification – energy mix;
That the oil and gas sector is transformed through a statutory framework (policies,
legislation, regulations and guidelines).
Upstream legislative framework on oil and gas is covered by the Minerals
and Petroleum Resources Development Act, 2002 (Act No. 28 of 2002)
[MPRDA]. The promotion aspects are under the Petroleum Agency of South
Africa (PASA) and the regulatory matters are handled by DMR.




S79 of MPRDA: concerns application to the Minister/PASA for the exploration
rights, and accommodates notification of interested persons and affected
communities.
S79(4) “a” and “b” addresses Environmental Management Program (EMP) and
consultation with interested parties and affected communities within 30 days of
the application.
Mediums for consultation: newspapers, workshops, posters, provincial gazettes,
notice of magistrate courts.
S39 of MPRDA provides for EMP with the Environmental Impact Assessment (EIA)
and financial security for rehabilitation.
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DOWNSTREAM GAS REGULATORY FRAMEWORK
•
Downstream legal / regulatory framework on gas is covered by the Gas Act,
2001 (Act No. 48 of 2001), whose objectives are to:

Promote the efficient, effective, sustainable and orderly development and
operation of downstream gas activities;

Facilitate investment in the gas industry;

Ensure the safe, efficient, economic and environmentally responsible
transmission, distribution, storage, liquefaction and re-gasification of gas;

Promote companies in the gas industry that are owned or controlled by HDSAs by
means of licence conditions so as to enable them to become competitive;

Ensure that gas transmission, storage, distribution, trading, liquefaction and
services are provided on an equitable basis and that the interests and needs
of all parties concerned are taken into consideration;

Promote skills development among employees in the gas industry;

Promote employment equity in the gas industry;

Facilitate gas trade between the Republic and other countries; and

Promote access to gas in an affordable and safe manner.
Regs associated with the Gas Act were promulgated in 2007
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GAS VALUE CHAIN
Market
Transmission
Power Station/
Bulk User
Large Industrial
Fields
Transmission
Small Industrial
Distribution
Gathering
Domestic
There is a need for an anchor customer - security of demand
Transformation throughout the value chain
Gas Utilisation Strategy under development by DoE
DOWNSTREAM OIL REG. FRAMEWORK
•
Downstream oil/petroleum regulatory framework is covered by the
Petroleum Products Act, 1977 (Act No 120 of 1977) as amended by Act No.
58 of 2003 & Act No. 2 of 2005 – the latter covering only technical changes
•
The PPA’s objectives are to:

Provide for the licensing of manufacturers (refiners), wholesalers and retailers of
petroleum products

Modernise the outdated Petroleum Products Act No. 120 of 1977
o
Amend, substitute or repeal obsolete provisions

Prohibit certain actions relating to petroleum products

Provide for appeals and arbitration o

Promote the transformation of the RSA petroleum and liquid fuels industry
o

Balance of power between retailers & wholesalers
“Give effect” to the Charter through licensing
Authorise the Minister of Minerals and Energy to make specific regulations
o
Thereby ensuring that governance of the liquid fuels sector is in line with Govt’s policy objectives
o
Give effect to policy issues identified in the Energy White Paper
o
Allow for provision of information
Imminent internal discourse on draft new PPB
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Technological advances enabling E&P in difficult terrains
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DOWNSTREAM OIL REG. FRAMEWORK (contd.)
•
The Petroleum Pipelines Act, 2003 (Act No 60 of 12003) is a key piece of
legislation for the oil/petroleum industry. Its objectives are to:

Promote competition in the construction and operation of petroleum pipelines,
loading facilities and storage facilities;

Promote the efficient, effective, sustainable and orderly development, operation and
use of petroleum pipelines, loading facilities and storage facilities;

Ensure the safe, efficient, economic and environmentally responsible transport,
loading and storage of petroleum;

Promote equitable access to petroleum pipelines, loading facilities and storage
facilities;

Facilitate investment in the petroleum pipeline industry;

Provide for the security of petroleum pipelines and related infrastructure;

Promote companies in the petroleum pipeline industry that are owned or controlled
by HDSAs, by means of licence conditions to enable them to become competitive;

Promote the development of competitive markets for petroleum products;

Promote access to affordable petroleum products; and

Ensure an appropriate supply of petroleum to meet market requirements.
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CURRENT ACCESS REGIMES
Energy
Resource /
Carrier
Transmission
Distribution
Storage
Route Change,
connection,
strengthening or
upgrading
Petroleum
common carrier
common carrier
3rd party access
to uncommitted
capacity
Yes proposer’s
cost
Gas
Commercially
reasonable 3rd
party access
monopoly
Commercially
reasonable 3rd
party access
Yes proposer’s
cost
Electricity
Nondiscriminatory 3rd
party access
Nondiscriminatory
3rd party
access
n/a
Yes condition of
licence,
proposer’s cost
Access to infrastructure – key enabler
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THE NEAR FUTURE
•
•
Establishment of NERSA in 2005 through the Energy Regulator Act of
2004 provides for the:

Regulation of the petroleum pipelines and gas industry through licensing –
HDSA empowerment being a key aspect thereof; and

Approval tariffs and prices.
Review process of the Gas Act led to the development of the Gas
Amendment Bill, 2013, which seeks to, amongst others:

promote companies in the gas industry that are owned or controlled by HDSAs
in accordance with the BBBEE Act and gas sector specific requirements;

promote the equitable provision of gas transmission, storage, distribution,
trading, compression, liquefaction and re-gasification services in the public
interest;

promote skills development and employment equity in the gas industry;

facilitate the development of competitive markets for gas and gas services.
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THE NEAR FUTURE (contd.)
•
•
•
Amendment of the MPRDA:

State free carry, etc.; and

One Bill or two Bills?
Review of the Petroleum Products Act:

New Petroleum Products Bill;

Internal discourse;
Petroleum Pipelines Act:

•
Normal process of plan-do-review in policy formulation
Overall challenge of an integrated approach to deal with:

Structural issues;

Concurrent jurisdiction – streamlined framework

o
Well coordinated function of various regulatory institutions over same / different segments
o
Convergence of energy carriers / resources (e.g. diesel / gas -vehicle propulsion & power gen)
Entry barriers to the capital intensive industry
o
Development, upgrade, maintenance and access to infrastructure
o
Risk profile (high risk offshore E&P)
Regulatory certainty is key for investments; Diagnosis report of
White Paper: Private sector investment not as high as envisaged –
Govt participation esp. required for backbone infrastructure.
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Ngiyabonga kakhulu
Thank you
Ke a leboha
Spasibo
Asante sana
Shukran gazilan
Inkomu
Merci beacoup
Muito obrigado
Ngiyathokoza
Vielen dank!
Ke a leboga
Mucho gracias
Ndiyabulela
Tusen takk
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