Potential impact of the Mineral and Petroleum Resources Development Amendment Bill on investment in South Africa's upstream oil and gas industry

The Mineral and Petroleum Resources Development Amendment Bill has drawn criticism from industry experts and the press. There are a number of amendments that could be damaging to future investment in South Africa's upstream oil and gas industry. This study examines the key changes brought about...

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Main Author: Ellis, Maryke Louise
Other Authors: Correia, Carlos
Format: Dissertation
Language:English
Published: University of Cape Town 2015
Subjects:
Online Access:http://hdl.handle.net/11427/15747
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spelling ndltd-netd.ac.za-oai-union.ndltd.org-uct-oai-localhost-11427-157472020-10-06T05:11:12Z Potential impact of the Mineral and Petroleum Resources Development Amendment Bill on investment in South Africa's upstream oil and gas industry Ellis, Maryke Louise Correia, Carlos Financial and Risk Management The Mineral and Petroleum Resources Development Amendment Bill has drawn criticism from industry experts and the press. There are a number of amendments that could be damaging to future investment in South Africa's upstream oil and gas industry. This study examines the key changes brought about by the Bill, South Africa's fiscal terms, how the fiscal terms are impacted by the Bill and current activity in South Africa's upstream oil and gas sector. The report then focuses on the most significant change made by the Bill, which is the level of State Participation. A fit for purpose economic model was built and the resulting cash flows were used to calculate the economic indicators presented in the results. The results from the model indicate how the increase in State Participation levels affects the ranking of South Africa's fiscal terms and the profitability of hypothetical investment opportunities. When ranked on fiscal terms, the country moves from having some of the best terms in Africa without the new Bill, to a position where the fiscal terms can be described as average or even onerous, depending on the interpretation of the State Participation clause. Accordingly, the result of the hypothetical investment opportunity has very positive economic indicators without the changes from the new Bill. If the most optimistic interpretation of the State Participation clause is modelled, the opportunity is less attractive but still viable and if the most pessimistic interpretation is modelled, the opportunity would not warrant investment. Even though South Africa has limited reserves, significant exploration activity is taking place under the existing legal and fiscal framework. If the Bill is implemented in its current format, it is likely that the country will see a significant decline in investment in the upstream oil and gas industry. Attracting new investment by international oil and gas companies in an environment governed by the terms of the proposed Bill will be challenging. 2015-12-09T14:47:59Z 2015-12-09T14:47:59Z 2015 Master Thesis Masters MCom http://hdl.handle.net/11427/15747 eng application/pdf University of Cape Town Faculty of Commerce Department of Finance and Tax
collection NDLTD
language English
format Dissertation
sources NDLTD
topic Financial and Risk Management
spellingShingle Financial and Risk Management
Ellis, Maryke Louise
Potential impact of the Mineral and Petroleum Resources Development Amendment Bill on investment in South Africa's upstream oil and gas industry
description The Mineral and Petroleum Resources Development Amendment Bill has drawn criticism from industry experts and the press. There are a number of amendments that could be damaging to future investment in South Africa's upstream oil and gas industry. This study examines the key changes brought about by the Bill, South Africa's fiscal terms, how the fiscal terms are impacted by the Bill and current activity in South Africa's upstream oil and gas sector. The report then focuses on the most significant change made by the Bill, which is the level of State Participation. A fit for purpose economic model was built and the resulting cash flows were used to calculate the economic indicators presented in the results. The results from the model indicate how the increase in State Participation levels affects the ranking of South Africa's fiscal terms and the profitability of hypothetical investment opportunities. When ranked on fiscal terms, the country moves from having some of the best terms in Africa without the new Bill, to a position where the fiscal terms can be described as average or even onerous, depending on the interpretation of the State Participation clause. Accordingly, the result of the hypothetical investment opportunity has very positive economic indicators without the changes from the new Bill. If the most optimistic interpretation of the State Participation clause is modelled, the opportunity is less attractive but still viable and if the most pessimistic interpretation is modelled, the opportunity would not warrant investment. Even though South Africa has limited reserves, significant exploration activity is taking place under the existing legal and fiscal framework. If the Bill is implemented in its current format, it is likely that the country will see a significant decline in investment in the upstream oil and gas industry. Attracting new investment by international oil and gas companies in an environment governed by the terms of the proposed Bill will be challenging.
author2 Correia, Carlos
author_facet Correia, Carlos
Ellis, Maryke Louise
author Ellis, Maryke Louise
author_sort Ellis, Maryke Louise
title Potential impact of the Mineral and Petroleum Resources Development Amendment Bill on investment in South Africa's upstream oil and gas industry
title_short Potential impact of the Mineral and Petroleum Resources Development Amendment Bill on investment in South Africa's upstream oil and gas industry
title_full Potential impact of the Mineral and Petroleum Resources Development Amendment Bill on investment in South Africa's upstream oil and gas industry
title_fullStr Potential impact of the Mineral and Petroleum Resources Development Amendment Bill on investment in South Africa's upstream oil and gas industry
title_full_unstemmed Potential impact of the Mineral and Petroleum Resources Development Amendment Bill on investment in South Africa's upstream oil and gas industry
title_sort potential impact of the mineral and petroleum resources development amendment bill on investment in south africa's upstream oil and gas industry
publisher University of Cape Town
publishDate 2015
url http://hdl.handle.net/11427/15747
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