2 Min Read
By Wendell Roelf
CAPE TOWN, Oct 29 (Reuters) - South Africa's government aims to take a 20 percent stake without payment in new gas and oil exploration and production ventures under proposed legislation, the Department of Mineral Resources said on Tuesday.
If the legislation is passed, large sums of money could flow to state coffers if the country begins exploiting its vast shale gas potential, but it could also put off potential investors.
The proposed legislation says the government should get a minimum 20 percent "free carried interest".
"Free carried interest means the interest derived from holding shares of which the holder enjoys all the rights of a shareholder but has no obligation to subscribe or contribute equity capital for the shares," it says.
The legislation also says the government can increase its stake to up to 50 percent but it was not immediately clear if that would also be free or if the state would fund its additional holding.
The law would affect companies such as ExxonMobil and Anadarko who are looking to explore for offshore oil and gas. Shell's inland fracking activities are also likely to be hit.
Duncan Clarke, the Johannesburg-based chairman of oil consultancy Global Pacific & Partners, said the legislation "amounts to de facto nationalisation without due compensation".
He said it "will halt foreign oil companies coming into offshore South Africa for high-risk exploration ventures, and likely cause in-place players to rethink their continuity or forward investments".
Africa's largest economy is keen to become more energy-independent. The prices of fuel imports are at the mercy of swings in the exchange rate of the volatile rand currency.
South Africa's cabinet signalled earlier this month it was keen to open the way for shale gas exploration in its vast, semi-arid Karoo region.