South Africa government seek free 20 percent stake in oil and gas projects

water rigSouth Africa’s ruling African National Congress urged the government to approve planned changes to laws for the oil and gas industry to help speed up development and resolve power shortages.

Lawmakers are yet to revise amendments to the 2002 Mineral and Petroleum Resources Development Act after President Jacob Zuma sent changes to the law back to parliament in January, concerned that they may breach constitutional rules.

The bill included proposals to give the state a free 20 percent stake in all new oil and natural-gas projects and the option to buy an unspecified additional share at an “agreed price.”

South Africa has the potential to install as much as 20 gigawatts of gas-fired plants by 2030 to reduce reliance on coal-based generation, Enoch Godongwana, chairman of the ANC’s economic transformation committee, said in an opinion piece in the Johannesburg-based Business Report on Tuesday.

While Eskom Holdings the state-owned power utility, is building new capacity to alleviate current shortages, more shortfalls are expected between 2025 and 2030, Godongwana said.

“While we see the potential for oil and gas discoveries in our country, none of this is proven until the companies commit risk capital to drill exploration wells,” Godongwana said. “This will not happen if there is no enabling environment.”

South Africa’s gross domestic product fell for the first time in more than a year in the second quarter, declining an annualized 1.3 percent as the economy grapples with power constraints and a slump in prices of platinum, copper and other commodities.

“South Africa’s electricity shortages continue to constrain growth,” Godongwana said. “The potential oil and gas discoveries present the democratic government with a unique and historic opportunity.”

Bloomberg 

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