South Africa s tugela basin up for grabs again

South Africa’s Tugela Basin Up for Grabs Again

South Africa News 11-25-2006

Global Offshore Oil Exploration (Offshore), a subsidiary of Colorado-based Global Energy Holdings, lost a long legal battle for sole rights to explore for oil in KwaZulu-Natal’s Tugela Basin, opening the way for other oil companies to apply for licenses to explore the area.

The legal battle started in 2004 when the board of state-owned South African Agency for the Promotion of Petroleum Exploration and Exploitation rejected the US company’s application for a permit to explore a block in the Tugela Basin believed to contain commercially viable deposits of natural oil and gas. The Agency was unhappy about the way Global’s application was made.

History has it that on April 17, 2003, the Agency invited all parties that had expressed an interest in exploring in the area to apply for the rights. An open licensing system was announced and all applications were to be dealt with on a “first come, first serve” basis. The following day, the board received an application from Global’s US-based head office which it found to be unusual since it was unlikely that the package inviting the company to apply could have reached the US.

However, the Agency did actually sign an agreement with the company but the board did not approve it. It instructed the management to follow through with a tender process believing that because several companies had been invited to apply, the “first come, first serve” principle should not be applied. And in October 2004, the board told Global that it could not recommend its application to the ministry.

Global proceeded to take its case to the Cape High Court, where it was dismissed in May. The Supreme Court of Appeal also dismissed its application in August. And last week, the Constitutional Court refused the application for leave to appeal, and ordered Global to pay costs. The court said it was not in the interests of justice to grant the application.

Director of law firm Smith Tabata Buchanan & Boyes, Vusumzi Matikinca, who represented the state in the case, said it was not surprising that Global had been so determined in its quest for the license. “Studies have shown that the Tugela Basin, and in particular the acreage that Global so desperately wanted to work on alone – trying to exclude other companies from even trying to tender for licenses – does have natural oil.”