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Could government's move to get its slice of new energy action backfire?

by , 28 May 2014

The South African government's plans to take a 20% stake in all new energy projects is under fire. The ANC want to push a change to the current law through before the next general election. But industry experts warn the move could mean SA misses out on opportunities as companies will simply take their business elsewhere. Let's take a closer look at the proposal…

What the amendment to the bill means

The government proposes changing “the 2002 Mineral and Petroleum Resources Development Act,” says IOL. If implemented, the changes would see the government gain “a 20% free stake in all new energy projects”.

It would also give the government a “right to buy an unspecified additional share at an ‘agreed price,’” adds IOL.

But people in the industry warn the move could see SA miss “out on another resources boom [in] oil and gas,” reports BDLive.

Today, the mineral resources committee in parliament “is due to adopt its report for the National Assembly on the Mineral and Petroleum Resources Amendment Bill,” adds BDLive. This means the government could “set the regulations shaping” the extraction of resources in the industry.

It would allow the government “to muscle in on new oil and gas ventures,” notes Bloomberg. Anne Fruhauf, an analyst at Teneo Intelligence, says “some upstream investors might simply relinquish their acreage if the bill is enacted in its current form”.

The change could hurt SA’s energy industry

In response to the proposed bill, The Offshore Petroleum Association of South Africa, expressed its “concern that the law would compromise the industry,” adds IOL.

Last week, a spokesman for the association said the change to law could “certainly [affect] future projects,” reports BDLive. The spokesman warned its “member companies would rather look elsewhere for their exploration”.

With the government’s planned change to the bill, it could backfire. Energy companies could just decide to explore elsewhere rather than have to adhere to it.

If parliament vote the amendment through, time will tell the effect on the energy industry.

Could government's move to get its slice of new energy action backfire?
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