South Africa Upstream Fiscal and Regulatory Report – Pending Legislation Creates Regulatory Uncertainty

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South Africa awards exploration and production licenses under a royalty and tax regime. The government has reverted to the original version of the Mineral and Petroleum Resources Development Act, withdrawing the long-awaited amendment bill. Instead, South Africa is seeking to separate the upstream hydrocarbon legislation from the mining legislation. A temporary moratorium has been placed on new applications until this legislation is defined. The pending legislation changes create uncertainty in the short-to-medium term. The award of shale gas applications also remains delayed as public consultations are revisited following increased public and lobby-group pressure. For future acreage awards, the government is planning to implement a competitive licensing round process. Previously the country held an open door policy.

“South Africa Upstream Fiscal and Regulatory Report – Pending Legislation Creates Regulatory Uncertainty”, presents the essential information relating to the terms which govern investment into South Africa’s upstream oil and gas sector. The report sets out in detail the contractual framework under which firms must operate in the industry, clearly defining factors affecting profitability and quantifying the state’s take from hydrocarbon production. Considering political, economic and industry specific variables, the report also analyses future trends for South Africa’s upstream oil and gas investment climate.


Overview of current fiscal terms governing upstream oil and gas operations in South Africa

Assessment of the current fiscal regime’s state take and attractiveness to investors

Charts illustrating the regime structure, and legal and institutional frameworks

Detail on legal framework and governing bodies administering the industry

Levels of upfront payments and taxation applicable to oil and gas production

Information on application of fiscal and regulatory terms to specific licenses

Outlook on future of fiscal and regulatory terms in South Africa

Reasons to Buy

Understand the complex regulations and contractual requirements applicable to South Africa’s upstream oil and gas sector

Evaluate factors determining profit levels in the industry

Identify potential regulatory issues facing investors in the country’s upstream sector

Utilize considered insight on future trends to inform decision-making

Table of Contents

1. Table of Contents

1. Table of Contents 1

1.1. List of Tables 2

1.2. List of Figures 2

2. Regime Overview 3

3. State Take Assessment 5

4. Key Fiscal Terms 6

4.1. Royalties, Bonuses and Fees 6

4.1.1. Royalties 6

4.1.2. Exploration Fees 6

4.1.3. Upstream Training Trust Fees 7

4.2. Direct Taxation 7

4.2.1. Corporate Income Tax 7

4.2.2. Deductions and Depreciation 8

4.2.3. Withholding Tax 8

4.3. Indirect Taxation 8

4.3.1. Value Added Tax 8

4.3.2. Customs Duties 9

4.4. Participation Requirements 9

4.4.1. State Participation 9

4.4.2. Historically Disadvantaged South African Participation 9

4.5. Fiscal Stability Agreements 9

5. Regulation and Licensing 10

5.1. Legal Framework 10

5.1.1. Governing Law 10

5.1.2. Contract Type 10

5.1.3. Title to Hydrocarbons 10

5.2. Institutional Framework 11

5.2.1. Licensing Authority 11

5.2.2. Regulatory Agency 11

5.2.3. National Oil Company 12

5.3. Licensing Process 12

5.4. License Terms 13

5.4.1. Duration and Relinquishments 13

5.4.2. Work Obligation 13

5.5. Local Content 13

5.6. Regulations on Hydraulic Fracturing 14

6. Outlook 15

7. Appendix 16

7.1. References 16

7.2. Contact Us 17

7.3. Disclaimer 17


1.1. List of Tables

Table 1: Regime Overview 3

Table 2: South Africa, Onshore Exploration Fees (ZAR) 6

Table 3: South Africa, Offshore Exploration Fees (ZAR) 7

Table 4: South Africa, General and Oil & Gas Corporate Tax Rates, 1980-Present 8

Table 5: South Africa, Application Fees (ZAR) 12

Table 6: References 16


1.2. List of Figures

Figure 1: Regime Flow Chart 4

Figure 2: South Africa, Indicative NPV10/boe, IRR and State Take Comparison, Regional 5

Figure 3: South Africa, Legal Framework 10

Figure 4: South Africa, Institutional Framework 11

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