2 years ago

Blue Chip Journal, Issue 77

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Blue Chip is a quarterly journal for the financial planning industry and is the official publication of the Financial Planning Institute of Southern Africa NPC (FPI), effective from the January 2020 edition. Blue Chip publishes contributions from FPI and other leading industry figures, covering all aspects of the financial planning industry.


THE PUBLIC EYE Why South Africa is an attractive destination for investors Petroleum Agency SA invites the world to “Explore South Africa”, and to discover the robust petroleum resources that have the potential to drive this economy. CEO Dr Phindile Masangane tells Blue Chip how investors can benefit from the South African oil and gas upstream sector. Please tell us about the history of Petroleum Agency SA. Petroleum Agency SA (PASA) has its roots in the Petroleum Licensing Unit of the then national oil company, Soekor (the predecessor of PetroSA). In 1999, following the Norwegian model, it was decided that regulation of the oil and gas upstream industry should be separated from the national oil company, and the Agency was formed through a ministerial directive. The Agency has successfully attracted major explorers to South Africa and facilitated the acquisition of many new large seismic surveys and some exploratory drilling, through a period affected by legislative issues and a major oil price crash. The company has grown from an organisation of about 25 to 85 staff today and is held in remarkably high regard by the local and international oil and gas industry that it serves. Currently, the agency is actively involved in shaping the new stand-alone upstream legislation and in guiding government with its decisions regarding the possible exploration for shale gas. South Africa has a particularly good petroleum resource potential, which remains unexplored. What is PASA’S core business function? PASA has three main functions. The first is to attract investment to South Africa’s oil and gas upstream industry through investment into exploration and production of oil and gas in South Africa. We have a team of geologists and geophysicists who interpret data gathered through past exploration activity to determine prospects and use this to attract exploration companies. The second function of PASA is to regulate the upstream industry in terms of the Mineral and Petroleum Resources Development Act, its regulations and other applicable legislation. The Agency has staff responsible for ensuring legal, technical and environmental compliance as organisations enter contracts with the state to explore for oil and gas. The third function is to act as the national archive for all data and information produced during oil and gas exploration and production in South Africa, and to curate and maintain this data for use and distribution. Other functions include advising the government on any issues pertinent to oil and gas as well as carrying out any special projects, as directed by the government. Where is the Agency at in terms of its market position? The Agency’s competitors are similar organisations in Africa, and beyond, attempting to attract oil and gas exploration 24

investment to their countries. For a long time, South Africa has not been seen as a destination for such investment, paling into insignificance in relation to countries such as Angola and Nigeria, both rich in oil, and even more recently Mozambique with its enormous gas discoveries. Our political stability, relatively advanced development, independent courts and equitable terms have always been our strong hand. The recent world-class Brulpadda discovery and South Africa’s potential for shale gas are helping to change perception and the upcoming standalone oil and gas legislation will further strengthen our position. You have recently taken over the position as CEO of PASA. Please share with us some of your ideas in terms of plans and strategies growing and improving PASA? South Africa has a particularly good petroleum resource potential, which remains unexplored. Prior to 1994, we did not have international oil companies in the country due to the political sanctions. All the exploration activities for oil and gas in South Africa were undertaken by Soekor. Oil and gas exploration is a highly capital intensive and high-risk business that cannot be left to a national oil company to do alone. In the democratic era, we have attracted several international oil and gas companies, including the majors like Shell, Total and ExxonMobil and have seen a few of our blocks being licensed. Significant exploration activity in terms of 2D and 3D seismic data collection has taken place since then, mainly by international oil companies. Where we are, is that we need to enter the next phase in terms of exploration – that of significant drilling activities. We need to move to prove the resources we have. This will be the game-changer for South Africa’s upstream oil and gas industry. The recent discovery by Total and its JV Partners in Block 11B/12B (Brulpadda) is the first giant step in that direction. My role is to work with industry and the department to fast-track these developments including finalising the Upstream Resource Development Bill. As we enter this phase in our industry development, we want to ensure that it is an inclusive and diversified industry in terms of race, gender and participation of SMEs. What would you consider to be PASA’s main challenge ahead? South Africa is playing catch-up in terms of upstream oil and gas development compared to other countries in the region. With the correct policies, fiscus proposition and domestic industry off-take opportunities we can win. PASA’s challenge is to ensure that both international and local energy companies see this value proposition in South Africa and choose our country. In this low oil and gas price environment, companies are inclined to cut back on capital investments, and we need to partner with them to sustain the momentum. What do you predict the company’s biggest success will be in the future? A vibrant upstream oil and gas industry that contributes to the security of our nation's energy supply and the economy having a substantially reduced dependence on imported gas. Do you think that a woman leader, in your position in the energy sector, will make a different impact on the company’s business? Women are naturally long-term visionaries and PASA is an important institution in the South African energy landscape. For the country to properly regulate the industry that is about to burst into the next phase of increased production, I am looking at the long-term sustainability of PASA as well as PASA’s capability to grow in tandem with the anticipated growth of the upstream oil and gas industry in South Africa. Any blue chip advice for readers? The next phase of drilling in the South Coast is starting in September 2020 and it is in deep waters, deeper than 1400m, similar to the depths where the gigantic Rovuma gas finds in Mozambique were made. Follow PASA on Twitter for more on this exciting economic development [@sa_petroleum]. DR PHINDILE C MASANGANE: PHD CHEMISTRY, MBA, BSC (MATHEMATICS & CHEMISTRY) Dr Masangane was appointed as the Chief Executive Officer of the South African upstream oil and gas regulatory authority, Petroleum Agency South Africa (PASA), in May 2020. Before then, Dr Masangane was an executive at the South African state-owned energy company, CEF (SOC) Ltd, which is the holding company of PASA. Dr Masangane was responsible for clean, renewable and alternative energy projects. In partnership with private companies, she led the development of energy projects including the deal structuring, project economic modelling and financing on behalf of the CEF Group of Companies. Her responsibilities also included supporting the national government in developing energy policy and regulations for diversifying the country’s energy mix. In 2019, Dr Masangane was Head of Strategy for the CEF Group of Companies where she led the development of the Group’s long-term strategic plan, Vision 2040+ as well as the Group’s gas strategy. Between 2010 and 2013, Dr Masangane was a partner and director at KPMG responsible for the Energy Advisory Division. In this capacity, she successfully led the capital raising of -billion for the Zimbabwe power utility, ZESA/ZPC’s hydro and coal power plants expansion programmes. 25

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