An oil company that recognises and appreciates that the limbo period exists is able to carefully time and navigate its renewal application so as to mitigate the effects of a lapse in time during which necessary government approvals are obtained.
In terms of the Mineral and Petroleum Resources Development Act of 2002 (“MPRDA”), the holder of an exploration right in South Africa enjoys, inter alia, the exclusive right to access the land to which the right relates for purposes of conducting exploration activities and to remove and dispose of petroleum samples found during such activities.
The prescribed duration of an exploration right is three years and it may be renewed on three occasions for such further periods not exceeding two years. It has therefore become accepted to conclude that “an exploration right in the Republic of South Africa endures for a period of nine years”.
However, a seamless and uninterrupted transition between the initial exploration period and a renewal period or between two renewal periods is not guaranteed under the MPRDA and in our experience it has become imperative that oil companies understand that exploration operations will be interrupted whilst the outcome of a renewal application is pending.
Identifying the hurdle
When lodging a renewal application the work programme outlined in such application can only commence once Ministerial approval is obtained. In practice, a Deed of Renewal (“Deed”) is executed by applicant and the government once the renewal application is approved. The execution date of the Deed, or in the alternative such date as may be stipulated in the Deed, signifies the commencement of the agreed work programme commitments. This may in some cases be problematic for an oil company who may be left in “limbo” pending Ministerial approval and execution of the aforementioned Deed.
This “limbo period” namely, the period between lodging of a renewal application and granting of the renewal application, can be up to six (6) months and it merits repeat that no exploration work can be done during the limbo period.
Possible Solution
The limbo period can be reduced or possibly avoided in its entirety by carefully planning ahead. There are essentially two ways in which this could be achieved:
- By including non-obligatory desktop studies in a current work programme which can be conducted during the limbo period, these studies can then be included as obligatory work programme activities in the renewal work programme which is pending government approval; or
- Submitting a renewal application at least six (6) months prior to the expiry of the previous period as this will reduce the limbo period.
An oil company that recognises and appreciates that the limbo period exists is able to carefully time and navigate its renewal application so as to mitigate the effects of a lapse in time during which necessary government approvals are obtained.
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