Anadarko halts South Africa oil spending pending clarity on oil law

By George Obulutsa NAIROBI

Posted on Wednesday, 30 April 2014 12:23

South Africa’s parliament passed the changes to the law last month, a move industry experts said would discourage investment.

Other firms have also voiced concerns about the legislation, which gives the mines minister wide-ranging powers to place certain minerals in a “value-addition” category, which means a portion would have to be processed domestically instead of exported in raw form.

“We have suspended our expenditures in South Africa until the petroleum law and fiscal terms are more clear,” Tom Fletcher, exploration manager for east Africa at Anadarko, told an energy conference in Nairobi on Wednesday.

Speaking to reporters on the conference sidelines, he said: “We are just looking for a little more clarity – what’s going to happen with the fiscal regime down there – before we invest large dollars in South Africa.”

Menno de Ruig, Shell’s exploration manager for new international upstream business in sub-Saharan Africa, echoed those concerns at the conference.

“We are hopeful that the current uncertainty around the petroleum bill in South Africa gets resolved in a workable manner so that we can move forward to the drilling phase,” he said.

The speed at which the bill passed before elections in May alarmed petroleum companies such as Shell, Anadarko, Total and Exxon Mobil, which want to explore South Africa after making big offshore gas finds in neighbouring Mozambique.

Shell has been exploring for shale gas in the onshore Karoo area, while Total said in November it expected to drill its first offshore well in the Outeniqua Basin, about 175 km (110 miles) off the southern coast of South Africa.

As well as the 20 percent “free carried interest”, the government also introduced a clause entitling it to increase its share of a project by acquiring a greater stake at an agreed price or by production-sharing agreements.

Industry critics of the law say it amounts to nationalisation without appropriate compensation.


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