# Summary

- Link: https://dearsouthafrica.co.za/2019-draft-upstream-petroleum-resources-development-bill/summary/
- Published: 2020-02-12T11:14:04+02:00
- Author: dearSA

[ PROVIDE YOUR INPUT ON 2019 DRAFT UPSTREAM PETROLEUM RESOURCES DEVELOPMENT BILL](https://dearsouthafrica.co.za/2019-draft-upstream-petroleum-resources-development-bill/)

The state is to have a 20%, cost-free interest and black participants a minimum 
10% stake in all petroleum projects in terms of a draft bill gazetted by the department
of mineral resources and energy on Tuesday.

The draft Upstream Petroleum Resources Development Bill has been published with 
cabinet consent for public comment, which is open until February 21. It has its 
origins in the Mineral and Petroleum Resources Development Amendment Bill, which
was withdrawn partly so that petroleum resources could be dealt with in a separate
piece of legislation.

The draft bill has been keenly awaited by the petroleum resources sector.

The bill also provides for the establishment of the Petroleum Agency of SA as the
national regulatory authority for the upstream petroleum sector. The agency will
deal with the applications for production, exploration and other rights and make
recommendations to the minister who will be responsible for granting them. The bill
also designates state-owned oil firm PetroSA as a national oil company.

The state, through PetroSA, will have a right to a 20% “carried interest” in exploration
and production rights. The costs of the carried interest will not be born by the
state. PetroSA will have to appoint two or more representatives to the joint operating
committee of the exploration or production operation to represent the state.

PetroSA will be entitled to full participation, including a corresponding percentage
of voting rights to the interest held in the joint operating agreement.

**Participating interest**

In terms of the draft bill, every exploration or production right must have a minimum
of 10% participating interest by black people, which must include the economic interest
plus the corresponding percentage of voting rights, per exploration or production
right.

In addition, the minister may, by notice in the gazette, reserve one or more blocks
in an open area for 100% black-owned companies. This will be subject to a black 
person’s participation in such a company not being diluted to less than 51% for 
purposes of raising capital; and any dilution to below that triggering the state
carried participation of up to a minimum of 10%.

When the need arises, the minister may also, through a gazette notice, require a
production-right holder to avail certain volumes of oil or gas to provide for the
country’s strategic stock, paying fair market value for the acquisition.

The bill stipulates that an exploration or production right or an interest in any
such right in an unlisted company or a controlling interest in a listed company 
may not be relinquished in any form without the prior written consent of the minister.
Neither can a part of a production right be partitioned without prior written consent
of the minister.

The finance minister will determine the royalties, production bonus and the petroleum
resource rent tax in respect of the development of petroleum resources in terms 
of an act of parliament.

“The proposed bill aims to strike a balance between the need to attract investment
into this key sector of the economy, and ensuring the potential of the upstream 
petroleum industry benefits all South Africans,” the department said in a statement
announcing the publication of the bill.

The preamble to the bill states that it recognises the internationally accepted 
right of the state to exercise sovereignty over all the petroleum resources within
SA.