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Interview

Lindiwe Mekwe – Acting CEO, Petroleum Agency South Africa (PASA)

Lindiwe Mekwe, acting CEO of Petroleum Agency South Africa (PASA), South Africa’s upstream licensing body, shares the major highlights over the past few years, the critical importance of the transformation agenda within the upstream sector, and the huge oil and gas opportunities still unexplored within the country.

Lindiwe, what have been some of the highlights for Petroleum Agency South Africa (PASA) over the past few years?

“Recent onshore exploration has yielded positive results in coalbed methane discoveries and investors may find opportunities in the monetization and development of these together with the companies already involved.”

The first I would like to highlight is the colloquium we held in October 2017 together with the mining industry, bringing together stakeholders from the mining and upstream oil and gas sectors, along with financiers and historically disadvantaged companies, on how we can drive transformation within the industry. This was a strategic objective PASA had set for itself and it was imperative that we moved forward on this.

The colloquium was a great opportunity for all stakeholders to attend and share ideas on how we could advance transformation within the sector. Transformation is about promoting inclusive growth to ensure that the South African communities benefit from our petroleum resources.

PASA’s mandate is to promote, facilitate and also regulate exploration and production in South Africa. This means that we have to ensure that all stakeholders’ interests, from the local communities to the investors, are taken care of. It is not always easy to balance these priorities, but it is imperative that we do.

As the E&P regulator, a main issue we had noticed was that our blocks were being taken up by mostly international companies, with many local companies not being present. We therefore saw the need to organize this colloquium to address the challenge. We wanted to bring together the industry to see how they can assist, and also the historically disadvantaged local companies to understand better the challenges they are facing. After a productive discussion, we are currently compiling a report for the Minister of Mineral Resources’ attention, and we have also committed to organizing another session this financial year in 2018 to share the progress we have made on this initiative.

South Africa’s downstream sector was the first to embrace transformation with the Liquid Fuels Charter in 2000. How progressive has the upstream sector been?

There has been positive change but more still needs to be down. After the Liquid Fuels Charter was established, we introduced a 10 percent state participation in each and every production right, which was to be held by our national oil company, PetroSA. This was an agreement we made with the Department of Mineral Resources (DMR) to have PetroSA take on the state participation requirement of all operators in South Africa.

Another achievement has been the ten percent broad-based black economic empowerment (BBBEE) requirement. We have already seen international operators compiling with this requirement and will be launching a status report soon.

We need to be robust in ensuring that transformation happens in the oil and gas industry and that international investors have clarity regarding government regulations on this front.

As the facilitator of upstream activity in the country, what has been the main concern for operators and license-holders here?

The main concern is the finalization of the Mineral and Petroleum Resources Development Act (MPRDA) amendments. This is what investors want to see. There is clarity regarding the process. The MPRDA has been sent to the Chairperson of the National Council of Provinces. PASA had provided inputs to the amendments through extensive engagement with industry regarding their concerns and feedback. We have also engaged with the DMR to ensure that they understand both our administrative challenges and investor concerns. This is part of our mandate as a facilitator within the sector and ensuring that everyone’s interests are fairly represented.

I am optimistic that the amendments will be finalized before the end of the year. The Minister of Finance has said that this bill is an urgent matter so the government does recognize that the finalization of this amendment is critical to the development of the sector.

What are the major upstream opportunities within South Africa you would like to highlight?

The major exploration opportunities offshore lie in the deep to ultra-deep water. While much of our acreage in these areas is already under license, opportunities for partnerships and risk sharing with the companies already in place are numerous. The deep and ultra-deep water off our west and south coasts is completely unexplored and in our opinion hold great potential. The east coast, shown to be so prolific in the north off Mozambique and Tanzania, has only four exploration wells drilled in South African waters, all very close to the coast.

Investors may also see opportunities in the development of already discovered reserves in the shallower water. The Ibhubesi gas field off our west coast is an example of this, where the operator, Sunbird Energy, intend to move ahead with the development of a small LNG project.

Recent onshore exploration has yielded positive results in coalbed methane discoveries and investors may find opportunities in the monetization and development of these together with the companies already involved. Finally, the potential for shale gas is enormous and shale gas exploration and production may very well develop into a major industry in the coming decades.

How does PASA promote awareness of upstream oil and gas opportunities in South Africa?

This is an important area of focus for us. Upstream oil and gas in South Africa is a fairly new industry.

Especially when it comes to local awareness, this is something we want to do more of because the oil and gas industry is not something that the average South African would be very familiar with. We are working on this by participating with DMR when they conduct their Imbizos (public awareness events), so that we can share more information with local communities and participants. We also maintain a strong presence at local and international conferences.

There has been an explosion of E&P activity in Africa. South Africa is a very attractive investment location because there is so much unexplored potential, and we offer a much more stable environment – from administrative, regulatory, financial, legislative, and judicial – than most of our African counterparts. This is really important for the industry.

This is why we hope to see more drilling over the next few years. We really hope to see companies advancing into the production phase, local participation increasing, and ultimately, South Africa benefiting sustainably and inclusively from the petroleum resources it has.

Do you have a final message to our audience?

We are at the last hurdle! It will not be long before the MPRDA is finalized. South Africa is ready for investors so interested parties should come and invest! We promise to protect your investment, we are a stable country with a long track record of strong institutions, and there are great opportunities here: onshore, shale, and offshore.

Come and invest! South Africa is ready. Our legislation will be certain and self-explanatory and we promise to protect your investment.

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