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Assessment of the Upstream Sector in the Oil and Gas Industry 1 Mr. Muzi W. Mkhize Chief Director : Hydrocarbons Policy

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Presentation on theme: "Assessment of the Upstream Sector in the Oil and Gas Industry 1 Mr. Muzi W. Mkhize Chief Director : Hydrocarbons Policy"— Presentation transcript:

1 Assessment of the Upstream Sector in the Oil and Gas Industry 1 Mr. Muzi W. Mkhize Chief Director : Hydrocarbons Policy Tel: /1

2 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

3 KEY CHALLENGES 3 Security of Supply HDSA Empowerment Lower Consumer Prices & Input Costs A difficult balancing act

4 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. 4

5 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. 5 Regs associated with the Gas Act were promulgated in 2007

6 GAS VALUE CHAIN There is a need for an anchor customer - security of demand Transformation throughout the value chain Gas Utilisation Strategy under development by DoE

7 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 PPAs 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 Balance of power between retailers & wholesalers Promote the transformation of the RSA petroleum and liquid fuels industry o 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 Govts policy objectives o Give effect to policy issues identified in the Energy White Paper o Allow for provision of information 7 Imminent internal discourse on draft new PPB

8 8 Technological advances enabling E&P in difficult terrains

9 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. 9

10 CURRENT ACCESS REGIMES 10 Energy Resource / Carrier TransmissionDistributionStorageRoute Change, connection, strengthening or upgrading Petroleumcommon carrier 3 rd party access to uncommitted capacity Yes proposers cost GasCommercially reasonable 3 rd party access monopolyCommercially reasonable 3 rd party access Yes proposers cost ElectricityNon- discriminatory 3 rd party access n/aYes condition of licence, proposers cost Access to infrastructure – key enabler

11 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. 11

12 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) 12 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.

13 Ngiyabonga kakhulu Thank you Ke a lebohaSpasibo Asante sana Shukran gazilanInkomu Merci beacoup Muito obrigado NgiyathokozaMucho gracias Vielen dank!Ndiyabulela Ke a lebogaTusen takk Ngiyabonga kakhulu Thank you Ke a lebohaSpasibo Asante sana Shukran gazilanInkomu Merci beacoup Muito obrigado NgiyathokozaMucho gracias Vielen dank!Ndiyabulela Ke a lebogaTusen takk 13


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