Marius Kloppers, BHP Billiton & Vincent Maphai, BHP Billiton SA
Send this article to a friend
Print this page

» SA coal not ex-growth, says BHP Billiton
» Kloppers appointed Billiton boss
» Copper to lift BHP Billiton

» JSE:BHP BILLITON PLC:
14383c 0%

BHP Billiton at oil license roadblock
David McKay
Posted: Mon, 25 Jun 2007

[miningmx.com] -- FISCAL and other regulatory uncertainties are throwing plans by BHP Billiton to drill for oil off the Cape peninsula into doubt. Old order exploration licences expired on 20 June, said Vincent Maphai, chairman of BHP Billiton SA.

In an update on its drilling programme, BHP Billiton said: “Along with others in the industry the Minerals & Petroleum Resources Development Act requires that BHP Billiton convert its two subleases to exploration rights before the end of this month.

"BHP Billiton continues to engage with and discuss the terms for this conversion with the Petroleum Agency of South Africa and other stakeholders.”

Drilling for offshore oil is an expensive business. BHP Billiton has estimated in the past a capital cost of R350m ($50m) to drill a single hole – and even then the cost is only for assessment. It may discover there’s no usable oil available.

Given the financial extent of an investment, the group is thought to be seeking certainty concerning levies it may have to pay in terms of proposals to legislate an annual royalty, known as the Royalty Bill.

In a second draft of the Royalty Bill, Government said shallow water oil and gas projects would be subject to a 3% royalty on revenues, while deepwater oil and gas projects would be taxed 1.5% /year on their revenues. There’s also unspecified complications with regard to the conversion of the licence itself that BHP Billiton wants resolved.

Click Here to subscribe to our daily newsletter
In an interview with Miningmx in May, Maphai said: “We have the exploration rights but if we strike something, who will own what and what will the royalties and taxes be?”

However, he added that those questions were “just practical things” and he didn’t anticipate a problem. But the matter still draws on. BHP Billiton owns blocks 3B and 4B and 3A and 4A, each estimated to be around 100km x 200km.

South Africa’s Minerals & Energy Department isn’t dealing initially with the matter but it will be the ultimate arbiter.

Said a department source: “I don’t know what Billiton is worrying about. There’s no fiscal levy on a prospecting right – which I’m sure they’ll want for three or four years, by which time the Royalty Bill will be enacted.”