Big changes coming to petroleum in South Africa

The Department of Mineral Resources and Energy published the draft Petroleum Products Bill, which will bring key changes to the petroleum and energy industry and boost economic growth. 

Legal experts from Cliffe Dekker Hofmeyr (CDH), Megan Rodgers, Jackwell Feris, Mukelwe Mthembu, Amore Carstens, and Charles Green explained this. 

The Department of Mineral Resources and Energy published the draft Petroleum Products Bill on 21 October for public comment, and stakeholders have been invited to share their comments until 20 December.

The Bill’s main objective is to ensure the security of South Africa’s petroleum supply while introducing modern, environmentally friendly components to enhance the country’s energy mix.

According to the Mineral Resources and Energy Minister Gwede Mantashe, petroleum must be given recognition by being elevated to its rightful place. This Bill aims to elevate it to a more independent status, separate from the mining sector. 

This separation will create distinct regulatory frameworks for petroleum exploration, production, and the broader mining industry in South Africa.

The Bill is designed to achieve several key goals: ensuring a reliable supply of petroleum products, promoting efficient and competitive production, and regulating the manufacturing, wholesaling, and retailing of petroleum. 

“The purpose of the Bill is to ensure the security of petroleum products and to introduce modern and environmentally friendly components that will improve the energy mix,” CDH’s experts added. 

“The Minister estimated that once the Bill has been made law, it will boost the country’s economic growth by up to 8%.”

Bowmans’ attorneys Claire Tucker and Dirk Wessels explained that the plan also aims to strengthen compliance by introducing regular inspections and enforcing industry regulations. 

A significant aspect of the Bill is its focus on environmental sustainability, and it hopes to address concerns about the environmental impact of energy production.

It seeks to introduce more modern and environmentally friendly energy products and renewable components that will improve South Africa’s energy mix.

While the Bill’s focus on improving the security and efficiency of petroleum supply could help stabilise fuel prices by reducing supply disruptions, some consumers may see price fluctuations. 

This is because these more modern and cleaner energy products could be more expensive to produce initially.

The Bill will also repeal the Petroleum Products Amendment Act of 2003 and introduce stricter environmental and safety measures. 

New licensing provisions will regulate the classification of Liquefied Petroleum Gases (LPG) like butane and propane while requiring businesses to implement environmental management practices to reduce emissions and prevent leaks.

“South Africa’s LPG sector is set for a boom thanks to rising energy prices, the construction of new distribution hubs and a shift towards cleaner energy sources,” Tucker and Wessels said.

“According to Argus, which analyses data in the global energy and commodities market, global gas consumption rose to half a billion metric tons in 2024 from 425,000 last year. As such, many businesses are expected to be affected by these new provisions.”

With stricter environmental regulations on petroleum products, particularly Liquefied Petroleum Gas (LPG), consumers may also benefit from safer, higher-quality products. 

In addition, the introduction of better safety standards for the handling, storage, and distribution of fuels could reduce the risk of accidents, spills, or leaks.

Tucker and Wessels explained that the Bill also supports the creation of a state-owned oil company, the National Petroleum Company of South Africa (SANPC), which will more effectively manage the country’s petroleum resources.

This consolidation will bring together key entities such as the Central Energy Fund, iGas, PetroSA, and the Strategic Fuel Fund (SFF), streamlining processes and improving oversight. 

The establishment of the SANPC is expected to increase efficiency in projects and oversight, making the sector more attractive to investors.

The proposed regulatory changes aim to create a clearer, more efficient legal and regulatory framework, which will encourage investment and improve compliance in the petroleum sector.

 At the same time, the Bill focuses on economic empowerment and sustainability, aligning with the South African Government’s broader priorities.

However, it remains to be seen whether the sector’s stakeholders will be able to effectively implement the proposed framework and deliver tangible benefits in practice.

Tucker and Wessels further explained that there have been no indications yet that the new B-BBEE provisions will diverge significantly from the current regime under the Liquid Fuels Charter.

This Charter requires a 25+1% black shareholding for licence holders and a 51% black shareholding for the import of petroleum products. 

“The Minister may, however, reserve specific classes of licences for majority black-owned companies in future.”