briefing the portfolio committee on mineral...

briefing the Portfolio Committee on Mineral resources 12 September 2013

better together…we deliver 2

presentation overview

Sasol background

The Mining and Upstream industries

MPRDA and its impacts

Introductions



Sasol background



Introductions


what we will share with you today…

key messages

Open cycle gas turbines, Secunda Sasol Synfuels, Secunda

• Sasol is anchored in South Africa

• We are committed to country and regional development

• Clear policy and regulatory development for mining and upstream sectors are key for investment

• Opportunity to position South Africa as the preferred mining and upstream investment destination

at home and abroad

• Sasol seeks collaboration with the State as a pre-requisite to ensure success

key messages

better together…we deliver 5 5

Sasol has exploration, development, production, marketing and sales operations in

38 countries across the world, employing more than 34 000 people.

our vision is to grow profitably, sustainably and inclusively, delivering value to stakeholders

through technology and the talent of our people in the energy and chemical markets in

Southern Africa and worldwide

Sasol is a proud South African based international

company


our integrated business model

Sasol

Petroleum

International

Sasol Mining


our South African business underpins Sasol

Sasol is strongly rooted in South Africa and we are continuing investment in our

foundation business


Sasol is committed to a strategy of investment in

South Africa to 2050

Employment

• R14bn Sasol Mine Replacement

Programme

• Exploration in SA and region

continues

• R1.5bn Natural Gas Power

Generation Unit

• R14bn Secunda Growth Project

• R8.4bn FT Wax Expansion Project

• R1.9bn Ethylene Purification Plant

• R1.1bn Cobalt Catalyst Plant

● 800 jobs created during

the construction phase

● 52 permanent jobs

created

● 5,200 jobs created

during construction

phase

● 165 permanent jobs on

project completion

● 5,000 jobs created

during the construction

phase

● 4,000 permanent jobs

retained

Reducing

carbon

footprint

Growing

production

Ensuring

long term

sustainability

our long term sustainability in South Africa requires a secure and continuous supply

of coal and gas

Current investment


we are on a good trajectory to secure our feedstock

requirements

• R14bn Sasol Mine Replacement

Programme

• Exploration in SA and region

continues

Ensuring

long term

sustainability

the Minerals and Petroleum Resources Development Act seen as a enabler to secure

our feedstock requirements

Sasol Mining

• New Shafts

• Shondoni

• New Mines

• Impumelelo Phase 1

• Thubelisha

• Limpopo West

• 60% of R14 billion already

spent

Sasol Petroleum International

• 2 sizeable offshore licenses

• Durban TCP032

• Block 3A-4A (JV with PetroSA)



Sasol background



Introductions


upstream and mining industries are very much

the same…

Upstream Mining

Upstream Downstream

Exploration

Development

Appraisal

Production

(Decommissioning)

Oil Refining

Gas Processing

Oil & Gas

Marketing

Petrochemicals

Transport

& Storage

Transport

& Storage

Midstream Source: UNCTAD

• Exploration (Prospecting)

• Appraisal

• Development

• Production (which includes selling products to the end consumer

Upstream Mining


…yet very different with respect to cost and risks

SPI – Temane, Mozambique CPU Sasol Mining - Thubelisha mine shaft - Secunda

Exploration & Appraisal

(Prospecting)

Cost (USD)

Time (years)

Probability of commercial success

Mining Upstream

5m

60%

3 – 10 years

Up to 150m per

well (offshore)

10 – 30%

5 – 10 years



Sasol background



Introductions


MPRDA key to position SA as the preferred mining

and upstream investment destination in Africa

• Provided inputs both via Chamber and Offshore Petroleum Association

• Submitted a detailed submission to the portfolio committee

• Highlighting only the key challenges

• Comments focused to provide policy certainty and capacity to implement as it speaks

directly to our ability to implement our strategic intent


... free carried interest...

Sasol’s understanding of the proposed Free Carried Interest (FCI)

State has a FCI

during exploration

FCI extends into

production

Investor carry cost of

exploration without

ability to recoup

FCI % unknown

creating investor

uncertainty

• Sasol supports the concept of FCI through exploration phase

• Current uncertainty with regard to the FCI can be addressed through:

stating the maximum + any additional interest in the enabling Act;

the investor being entitled to recover the exploration cost from the State once

exercised (in either development or production phase);

it being converted to working interest from development to production.

• A specified maximum State interest will provide certainty to investor and stimulate

investment


... Mining Charter becoming applicable to upstream...

Sasol’s interpretation of the application of the Mining Charter to the Upstream

Upstream petroleum

activities will now

become subject to

the Mining Charter

Increased BEE

ownership in a

capital intensive

activity

Inherently high risk

Upstream activities in

SA still in nascent

stage

State + BEE

participation unclear

• Sasol is a level 3 contributor and regard BEE as a socio-economic imperative

• BEE and State’s interest should be set at a clear and reasonable target/level:

during the different phases of upstream activities that makes it economically

viable for all stakeholders;

clarifying exact extent to which BEE must be complied with at the different levels.

• The high cost + associated risk + low chance of success inherent in upstream activities

makes it challenging to attract investors & it is not clear whether this was considered


...disbanding Petroleum Agency of South Africa

(PASA)...

Sasol’s understanding of the impacts of disbanding PASA

Regional Managers

will take

responsibility for

“PASA”

responsibilities

Decentralisation

potentially result In

inconsistency

actions and

decisions

Contrary to

international

experience where

administration is

centrally controlled

Concern to Sasol as

it potentially impedes

it in securing

sufficient feedstock

• Support proposed distinction between the role of Policy Maker, Regulator and State

participation

• Support for a specialised unit to process oil and gas applications

• Propose a centrally located regulator

sustainable management and retention of exploration data

consistency of actions and decisions

single port of call for entry into upstream

retain expertise


... increasing the extent of a mining right through

amendments...

Sasol’s understanding of the partitioning and increasing the extent of rights

Unable to obtain

rights over

partitioned rights or

inclusion of areas

into rights

amendment

difficulty to obtain

access to small and

stranded reserves to

ensure boundary

optimisation

accessed


securing sufficient

feedstock and

security of tenure

provision is as

potentially impeding

the transfer and

amendment of rights

• Support the partitioning of rights and amendment of areas to increase extent

• Reserves to be included often small, geologically restricted that can only be mined

from existing mines and has no business case by itself therefor application may be

refused.

• Propose that in terms of Section 102 an area can be extended:

Minister already has powers to request additional information

application could be made subject to similar requirements as Section 16 and 22

but not the sections specifically


... concentration of rights...

Sasol’s interpretation of the application of the concentration of rights

Inability to optimise

existing reserves

and to secure

feedstock to 2050

Marginal fields and

stranded reserves

may not be accessed

Concern to Sasol as


it in securing

sufficient feedstock

Determination seem

to be influenced by

the number of rights

a company holds

• Concentration of rights should recognise optimisation and efficiency efforts

make marginal prospects viable (optimal resource utilisation)

avoid sterilisation of stranded resources

feedstock cost and allocation to ensure long term sustainability of operations

• Determining a concentration of rights should not be based on number of rights but on

merit having regard to relevant factors such as:

life of mine, usage and purpose; and

reference to factors such as geological constraints, quality of the reserve,

proximity to markets, cost to develop the resource, etc


removal of time frames

Sasol’s understanding of the impacts of removal of time frames

The 2008 Act

introduced specific

timeframes which has

now been removed

Time frames to be set

out in regulations

Removal of time

frames take away

certainty

Risk mitigated by

way of planning but

lack of time frames

makes planning

difficult

• Mining and Upstream activities are costly with inherently high risks

• Certainty on application time frames for rights alleviates the procedural risks

• Time frames set out in the enabling Act:

provides investors certainty on how long it will take to obtain the rights applied for;

enables effective planning with regard to project planning, project implementation

sourcing funding and when a return on investment may be received;

as opposed to it being set out in the regulations provides procedural certainty.

• Propose that the time periods in the 2008 Amendment Act should be retained.


MPRDA is key for the successful development of the

minerals and upstream industries in South Africa

The success of the mining and upstream sectors can be enabled through the MPRDA in

it being:

• economically competitive

• carefully aligned with other government policies

• focussed on creating policy and regulatory certainty and capacity to implement

Sasol is fully supportive of the role of the Department of Mineral Resources as well as

that of the Portfolio Committee and will avail ourselves to discuss any aspects that

require more information

thank you [email protected]

briefing the portfolio committee on mineral...

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