Upstream Petroleum Resources Development Bill: DMRE briefing & oral submissions

Meeting report

The Chairperson of the Standing Committee on Finance, Economic Opportunities and Tourism welcomed all to the meeting and apologies were acknowledged. The Chairperson handed over to the Department for its presentation.

Briefing by the Department of Mineral Resources and Energy (DMRE) on the Upstream Petroleum Resources Development Bill [B 13B - 2021]

Ms Sibongile Malie, DMRE, delivered a presentation to the Standing Committee on Finance, Economic Opportunities, and Tourism (WCPP) regarding the Upstream Petroleum Resources Development Bill (UPRD) [B 13B - 2021], aiming to enhance the regulatory framework surrounding petroleum resources in South Africa. She highlighted the current regulatory landscape, indicating that the Mineral and Petroleum Resources Development Act (MPRDA) governs petroleum resource development under Chapter Six, yet lacks the depth required to address critical aspects necessary for the growth and advancement of the upstream petroleum industry within South Africa.

The Draft UPRD Bill is positioned as a pivotal piece of legislation, seeking to fortify regulations about upstream petroleum activities. It underscores a substantial value proposition for South Africa, particularly by aligning with internationally accepted norms and standards in the oil and gas sector. Ms Malie emphasised that the term 'upstream petroleum development' encapsulates both the exploration and production phases of oil and gas resources.

The objectives of the Bill, as elucidated, are multifaceted. They encompass the recognition of the state's sovereignty over all petroleum resources within the Republic, the promotion of equitable access to these resources, and the facilitation of increased participation by black individuals in the sector. This participation is vital to ensure that all citizens benefit from exploiting the nation's petroleum resources.

Key provisions within the Bill were delineated comprehensively during the presentation. Clause Three establishes the custodianship of petroleum resources by the state, and Clause Eight mandates the administration of all acreage for petroleum exploration, development, and production in South Africa by the Petroleum Agency. Further, Clause 10 articulates the functions of the Petroleum Agency, while Clauses 13 and 14 outline procedures for initiating competitive licensing rounds and stipulate the duration of petroleum rights, respectively.

The Bill also addresses the imperative of facilitating the participation of black individuals in the petroleum sector. Notably, Clause 31 mandates a minimum 10% interest in petroleum rights for black persons on commercial terms, while Clause 34 designates the State Petroleum Company as a state-owned entity responsible for managing state participation in exploration and production activities, with the state entitled to a 20% carried interest in petroleum rights.

Furthermore, the Bill encompasses clauses addressing consultation with interested and affected parties, environmental responsibilities of rights holders, financial guarantees for petroleum operations, and the Minister's power to expropriate property for exploration or production purposes.

Schedule One of the Bill includes transitional provisions aimed at affirming the security of existing permits or rights, facilitating their transition to the new legislative framework provided by the UPRD Bill. Ms Malie underscored the critical importance of passing the Bill into law for the development and growth of South Africa's oil and gas sector, stressing its significance in advancing the country's energy industry on both national and international fronts.

See attached for full presentation

Discussion

A member of the public, representing the indigenous community, raised questions and concerns. He began by expressing gratitude for the opportunity to speak, highlighting the historical marginalisation and exploitation faced by indigenous people in South Africa. The speaker stressed the importance of recognising and involving indigenous communities, particularly in regions like the Northern Cape, where mineral rights often intersect with ancestral lands belonging to the Khoisan and Bushman communities.

Drawing attention to ongoing issues of land dispossession and the lack of representation for indigenous perspectives in policymaking, the speaker questioned the criteria used to determine black ownership in the petroleum sector. He raised concerns about the historical narrative presented in South Africa, urging for a more inclusive telling of history that acknowledges the contributions and struggles of indigenous peoples.

Further, the speaker highlighted the impact of multinational corporations on indigenous lands. He called for greater protection of indigenous rights and lands against such corporate exploitation, emphasising the need for meaningful consultation and adherence to indigenous concerns in legislative processes.

The speaker also criticised political parties for their role in perpetuating marginalisation, particularly through policies like Black Economic Empowerment (BEE), which he viewed as a form of economic subjugation rather than empowerment for indigenous communities. He called for a more equitable distribution of resources and opportunities, challenging the government to prioritise the needs of the poorest and most vulnerable segments of society.

Another member of the public expressed frustration over the lack of implementation of past engagements and highlighted the ongoing exclusion of indigenous people from development decisions. She emphasised the exclusive right of Aboriginal people to any development on their land and demanded that they be the first participants in consultations regarding prospective developments. The speaker questioned why indigenous voices continue to be ignored despite claims of inclusivity in media.

She denounced the exploitation and violation of coloured communities and called attention to the ongoing issues affecting indigenous peoples. She vehemently opposed any further development in Aboriginal communities without prior consultation and inclusion in decision-making processes. The speakers called for an end to disrespect and arrogance from authorities and urged genuine implementation of indigenous insights and desires in development plans.

Another member of the public raised concerns about the incorporation of international law into the Bill, particularly referencing the United Nations Declaration on the Rights of Indigenous Peoples. He highlighted the principle of free, prior, and informed consent for indigenous peoples before mineral extraction.

The participant stressed the importance of scrutinising the Bill to ensure compliance with international law, especially regarding indigenous rights over mineral resources. He expressed apprehension that exploiting these resources primarily benefits external entities while leaving South Africans with minimal benefits.

Responses

In response to the concerns raised during the session, a Department representative provided clarifications and explanations regarding various aspects of the Bill.

Regarding the definition of "black person," it was emphasised that the Bill does not dictate specific racial compositions for the 10% participation requirement. Instead, it mandates that there must be 10% participation by black persons, without specifying the racial breakdown across African, Coloured and Indian. Determining who qualifies as a black person is left to the discretion of international companies participating in the sector.

Regarding environmental issues, it was outlined that the Minister of Mineral Resources and Energy implements laws related to environmental protection, the Minister of Environmental Affairs oversees appeals and ensures that environmental concerns are adequately addressed in the application process.

The Department representative also highlighted provisions in the Bill for consultation with directly affected communities and stakeholders. It was explained that the Bill includes mechanisms for communities to raise concerns about potential loss or damage due to petroleum operations, with opportunities for arbitration or compensation where necessary. Furthermore, the Bill empowers the Minister to develop regulations for local content, including opportunities for local procurement and skills development.

In response to the comments made during the session, another representative from the Department highlighted the importance of freedom of speech as enshrined in the Constitution, expressing gratitude for the diverse perspectives brought to the table during the discussion. The representative acknowledged the caution raised by some members of the public regarding the incorporation of international labour law into the Bill. The public was assured that the Department would take this feedback into account and ensure that the regulations accompanying the legislation would safeguard the rights of indigenous people.

Another round of questions was opened by the Chairperson.

A member of the public raised concerns about the lack of clear definitions in the Bill regarding who qualifies as "black." They highlighted the issue of unemployment in areas like the Northern Cape, where residents often face exclusion from job opportunities. The participant expressed frustration with the unequal application of policies like Black Economic Empowerment (BEE), which they perceived as favouring certain racial groups over others.

A member of the public questioned the fairness of policies that mandate specific racial quotas, such as those observed in the Department of Education, where employment percentages are allocated based on race. The participant argued that such practices undermine social cohesion and perpetuate inequalities. Moreover, they draw attention to the historical marginalisation and oppression faced by indigenous communities, particularly in the Western Cape, where the Khoi people have a significant presence. Despite the region's historical significance, the participant lamented the ongoing marginalisation and overlooking of indigenous voices in various government departments.

Another member of the public asked the Department questions. Firstly, the participants questioned the inclusivity of the process regarding the Bill's dissemination, particularly in reaching communities on the Cape Flats. He sought statistical evidence to demonstrate that these communities were adequately informed about the Bill.

Secondly, the participant highlighted their experience with business registration processes and BEE compliance. Despite assisting numerous Aboriginal people in registering businesses according to government procedures, none of these businesses received tenders. He described the challenges faced during the pandemic, where closures prevented necessary registrations and financial difficulties hindered compliance renewals. He sought clarity on how proposed measures in the Bill would address these issues and ensure inclusive participation and opportunities for historically disadvantaged communities.

In response to the questions raised, the Department clarified several key points regarding the inclusivity and opportunities outlined in the Bill. Firstly, they addressed concerns regarding the definition of "black" and the 10% participation requirement. The Department emphasised that the Bill does not prevent any group, including indigenous peoples, from applying for petroleum rights. Any nation or racial grouping is free to apply for rights, even at 100% ownership level, provided they can demonstrate the capability to explore, develop, and produce oil and gas. This means that indigenous peoples, including First Nations, Aboriginal peoples, and the Khoisan, are not limited to only 10% participation. They can organise themselves, pool resources, and apply for rights independently or in partnership with larger companies.

Regarding the definition of a "black person" as outlined in the Bill, the Department highlighted that it includes individuals who are citizens of the Republic of South Africa by birth, descent, or naturalisation before 27 April 1994. However, it was emphasised that individuals or companies not falling within the definition of "black person" can still apply for petroleum rights, but they would be subject to the regulations regarding employment opportunities, including the 10% participation requirement for black persons.

Additionally, the Department highlighted the capital-intensive nature of oil and gas exploration, with drilling alone costing billions of Rands. The Department explained that while large companies often hold offshore rights due to their financial capacity, indigenous groups can still access funding and negotiate partnerships with these companies. This allows for flexibility in ownership structures and collaboration arrangements.

The Department further clarified that the requirements for doing business with the government, such as those outlined in the Broad-Based Black Economic Empowerment (B-BBEE) codes of good practice, fall under the jurisdiction of the Department of Trade and Industry (DTI). These requirements aim to ensure that companies engaging in business with the government meet certain standards of empowerment and compliance.

A final round of questions was opened by the Chairperson.

A member of the public asked a question that revolved around the comparison between the local content plan and the social labour plan within the petroleum industry's regulatory framework. They inquired whether these plans serve analogous roles or if they have distinct functions.

Moreover, the speaker sought clarification on the rationale behind Clause 14, which delineates a production phase initially, followed by a potential 10-year extension. They inquired why interested and affected parties were not involved from the beginning.

Another speaker posed a question concerning the classification of racial identities within the context of government policies. He expressed confusion and concern about being labelled as "black" despite identifying as "coloured" according to historical and legal classifications. The speaker emphasised the significance of maintaining their coloured identity to access opportunities and asserted that their exclusion from policy definitions affected their ability to participate fully. They sought clarification on how the definitions of "black" and "coloured" were established and highlighted the importance of recognising individual identities.

The Department responded to the questions raised by the public, explaining that if the indigenous people organised themselves and applied for a petroleum right at 100% in terms of the ownership of oil and gas rights, they would have full ownership of the oil and gas discovered and produced. However, they would still be required to pay taxes and royalties to the state.

Regarding the duration of petroleum rights, the Department explained that there is a nine-year exploration period followed by a 30-year production period, which can be extended for a further ten years. The question was raised about why the Bill does not provide for consultation when these terms are extended. The Department explained that the regulations developed after the Bill's enactment would address these terms, and further public participation might be required, especially in cases where fields become marginal and local participation is needed.

Oral submissions

Ms Dimakatso Sefatsa, Attorney, Centre for Environmental Rights, made an oral submission to the Committee highlighting various concerns regarding the Bill, emphasising its flaws and conflicts with existing environmental regulations.

Ms Sefatsa expressed concern that the Bill's focus on accelerating oil and gas exploration disregards the urgent need to address the climate crisis. South Africa, she noted, is particularly vulnerable to climate impacts, and expediting gas extraction could exacerbate environmental degradation and water scarcity, especially in provinces like the Free State, Mpumalanga, and KwaZulu-Natal.

Further, she pointed out a fundamental conflict with the One Environmental System. The Bill proposes legislation on environmental matters falling under the jurisdiction of the Minister of Forestry, Fisheries, and Environment. This, Ms Sefatsa argued, creates discord with the existing environmental framework, raising questions about the absence of required environmental authorisations and financial provisions for petroleum rights.

In addition, Ms Sefatsa criticised the Bill for its lack of provisions for local economic development. While it mentions local content plans, she argued that these plans fail to adequately address the needs of affected communities or provide for poverty alleviation and inequality reduction.

Finally, Ms Sefatsa raised concerns about the Bill's consultation provisions. She deemed them insufficient and feared they might exclude marginalised groups from participating in the decision-making process. Ambiguity regarding which parties are considered interested and affected could lead to uncertainty, non-compliance, and potential rights violations.

Ms Priyanka Naidoo, representing The Green Connection, voiced concerns about the flaws in the Bill, particularly regarding its potential impact on South Africa's commitment to decarbonisation and its economic competitiveness. Despite submitting comments during the National Assembly's public participation process, Ms Naidoo expressed disappointment that these were not considered, and the Bill was passed in its current form without revision by the National Council of Provinces (NCOP).

Ms Naidoo highlighted several key issues with the Bill. Firstly, she argued that it would lock South Africa into fossil fuel dependency at a time when the rest of the world is transitioning to cleaner energy sources. This, she stated, is contrary to South Africa's climate change commitments and the type of sustainable development the country needs.

Moreover, Ms Naidoo pointed out that with the introduction of the European Union's Carbon Border Adjustment Mechanism, South African goods produced using fossil-fuel-derived energy would face increased taxes and costs, making them less competitive in the international market. This, she warned, could jeopardise millions of jobs in sectors such as agriculture, manufacturing, and industry, exacerbating the country's economic challenges.

Mr Unathi Sonti, representing the Maritime Business Chamber, expressed appreciation for the government's efforts to facilitate the participation of historically disadvantaged individuals in South Africa through the Bill. Mr Sonti commended the alignment of the Bill with global decarbonisation initiatives and the provisions for 10% ownership by designated groups, including 100% black-owned rights for communities. However, Mr Sonti emphasised the importance of proactive monitoring to prevent exploitation and ensure equitable benefit-sharing.

An oral submission from a member of the public representing the First Nation people was submitted. The speaker advocated for giving First Nation people a greater role in safeguarding mineral resources, highlighting their unique connection to certain areas and their potential to ensure proper protection. They emphasised the need for regulation to prevent exploitation by foreign entities. They suggested that these countries should empower local communities with the necessary skills and knowledge instead of simply extracting resources. The speaker urged for a rejection of the current Bill in its form, proposing alternative approaches that prioritise the involvement of First Nation people as custodians of natural resources.

An activist for the rights of indigenous people expressed deep frustration with the government's failure to address the needs of indigenous people in South Africa, citing ongoing and systemic oppression. She highlighted disparities in education and suggested that the system is designed to disadvantage indigenous communities. Despite efforts to work with the government, they feel marginalised and excluded from decision-making processes. As a result, indigenous people have seen the need for self-governance and self-determination to secure their rights and restore the country's true essence. She referenced the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) as a framework for asserting their rights and reclaiming their rightful place in South Africa.

The Chairperson thanked all for the submissions and the participation.

The meeting was adjourned.