Petroleum Agency SA; Mine Health and Safety Council & Inspectorate on their 2011/12 Annual Reports

Meeting report

Petroleum Agency South Africa (PASA) 2011/12 Annual Report briefing
Ms O Mans, PASA CFO, highlighted that the agency received an unqualified report with no matters of emphasis. It was a successful year and profits increased from R7.3 million to R56 million. Data sales were R31 million worth of data to operators. PASA had R250.8 million in cash at the beginning of the year and R313 million in cash at the end of the year. They had continued income from unconverted old order rights worth R64.5 million.

Ntsiki Van Averbeke, General Manager:Promotion of PASA, said that some promotional activities PASA was involved in were:
-participation in shale gas task team
-exhibitions and presentations with Geosynthesis, Africa Upstream and others
-invited to speak at East Africa Oil, Gas and Energy Conference
-high percentage of acreage under licence/permit
-increased interest in unconventional oil and gas onshore.

Ms Van Averbeke explained and showed the areas of petroleum exploration and production activities in South Africa. In 2009 PASA only had their West Coast licence, a little on the south coast and little piece on the east coast. The current situation was virtually all offshore acreage was under licence or under application. Onshore there were applications for coal bed methane (CBMs) and there were applications for shale gas.  At the moment, PASA had licences right through the coast. Onshore, she showed the Committee on the map where there were shale gas applications. The implication for the full hub map was the workload that was going to come to PASA. In the next few years, 34 000 km of seismic 2D, 12 3000 sq km of seismic 3D and 19 wells were going to be drilled. Onshore there would be 65 wells that would have been drilled. The Agency was responsible for taking data, evaluating it, delineating prospectively in it, promoting acreage to new operators and explaining it to current ones. This meant that there would be a stretching of the already stretched resource evaluation team, increased environmental monitoring and increased technical monitoring.

The Shelf Claim Project was given to PASA by the Minister. This project was claiming an extension of maritime boundaries off of Prince Edwards Islands. If the claim was successful then the maritime area that would be under the jurisdiction of South Africa would be double that of its onshore area. PASA had secured an additional R22 million funding to finalise the project and the sub-commission date for defence of claim was set for 2014.

Within licensing and regulation, all applications received were processed within the legislated time frames and 41 submissions were finalised.

Ms Van Averbeke said there was a continued interest in shale gas from major and local players. They had applications from Shell and Falcon Oil and Gas to convert to Exploration Rights. There was a moratorium on new applications to allow for a structured process rather than an open door one. The agency had stressed its determination to remain objective in order to carry out its mandate successfully.

She noted that there was a massive interest in data both on and offshore, and R1 million income from data sales was made. PASA’s information management software was reaching “end of life” however a data management infrastructure review was undertaken and an investigation into possible replacement software was underway. There was provision of services to Namcor.

PASA’s corporate social responsibility projects included 5 internships, promotion of science in schools and tertiary institutions, Upstream Training Trust (UTT) bursaries and Habitat for Humanity house building. In regards to their corporate performance PASA set numerical targets of 3 on a scale of 5 and was able to match or do better in all cases.

 Petroleum Agency SA had been established in 1999 and in 2001 a new State oil company, PetroSA, was formed by the merger of Soekor and Mossgas. SOEKOR had been an entity that was responsible for the exploration and production of oil and gas, as well as the licensing and monitoring of both activities. This was the reason for the separation of SOEKOR to form the two separate entities, PetroSA and the Petroleum Agency. There were no conflicts between promotion and regulatory functions.

Discussion
The Chairperson said that he wanted to avoid turning questions into ones about shale gas, the Committee would have PASA and the Department come to discuss this later.

Mr J Lorimer (DA) asked in regards to CBM, was there any new production, who was doing it and what had been done with it? He wanted to know who was doing the environmental monitoring and how often? Who was tasked with writing legislation which would govern exploration of shale gas, was it PASA or the Task Team? In addition he wanted to know the timeline for completion. He asked for details on how capacity building in terms of unconventionals was done. How hard was it to find people with the necessary skills and did PSA have money for it? Would the exploration rights of the two applications be granted for shale gas, when would this be and on what basis was the decision made?

Mr H Schmidt (DA) referred to the unconverted old order rights and asked how one derived income from unconverted old order rights. Were they going to be converted at some point in time and if it needed to be converted, was there a timeline for that? When did PASA expect applications to be approved, resulting in real time prospecting and real time mining for shale gas?

Mr M Sonto (ANC) referred to the exploration activity of the Shelf Claim Project. He wanted to know who was granting South Africa the right to explore South Africa’s own land; it was already South African land. On basis of income that was consistently mentioned it was hard for Mr Sonto to believe that their software was reaching “end of life.” He did not think PASA needed to be mentioning this if they were boasting a healthy income. What was the duty of PASA if it was not regulating, and then they were promoting. How should PASA be strengthened and what do you mean by that?

Ms Bikani asked what was done with the money from unconverted old order rights. How much was involved in the total budget to carry out the corporate social responsibility projects? She asked PASA to explain how they measured corporate performance in the presentation.

Ms Averbeke said that with coal bed methane (CBM), Anglo American had been working in a certain area. Anglo American had just been issued a conversion of their exploration rights. They had been running a task pilot in that area and they should be producing soon. Kinetiko Energy had exploration rights as well. In regards to environmental monitors, before PASA issued an exploration right, the company needed to give an Environment Management Plan and, before production started, it would be converted into an Environmental Impact Assessment report. They paid these companies twice a year to check and see if they were doing what they said they would do.

With regard to regulation of shale gas, it was the policymakers who wrote the regulations. PASA might be asked to assist in writing regulations, but PASA enforced the regulation, they did not write it. PASA continued to do capacity building both with conventional and unconventional. PASA increased capacity with unconventionals because the resources evaluation was not the same as the conventionals. Unconventionals were new in South Africa, so PASA had to make sure their technical guides could do resource evaluation. PASA had their own assessment of what they thought the resources were onshore. On the issue about how the applications would be handled and the timeline for shale gas, tomorrow PASA had a meeting with the DMR Director General who assured them they would be getting an indication of how to deal with applications from the Gazette which would be published next week.

They had not been told how to proceed with applications on their side. New applications had a timeline but conversion of rights had no timeline. PASA could only convert rights when all required documents had been given to PASA. Old order rights were now called royalties and these were being paid to PASA and that was how PASA sustained itself. At the end of this year, rights would be converted and royalties would go to Treasury. She explained that the 200 nautical mile boundary was shown in the map with an orange line. The Islands had an orange line as well showing the boundary, and this represented what South Africa owned. She said that up to 350 nautical miles could be claimed if there was a proved continuity of a continental shelf. South Africa had to submit claims and the UN assigned them to a committee and they had to go and defend their claim as to whether it was scientifically sound. They were still waiting. The PASA Act encouraged it to assist agencies with similar functions in the region in the name of regional cooperation. They used to assist Namcor, a Namibian company. PASA had income, but their funding had not been resolved. All the money went to Treasury now and not to PASA because of the Act.

The Chairperson asked what would happen when the royalties did not come to PASA.

Ms Averbeke explained that PASA was hanging on to its reserves and the Act said they would be funded by funds appropriated by Cabinet. What they had now in reserves would sustain them for the next three years. There was not a problem between promotion and regulation because they were promoting South Africa’s prospectivity. PASA was a one stop shop where explorers would come to PASA to get data. They would then go to Regulation who would tell them how to apply. She did not see where the perceived conflict came from. PASA had 5 interns and the 5 interns were paid by the Agency.

Ms Bikani asked for the amounts involved in the Social Responsibility projects, what were the timeframes aligned with them and what benefits did PASA get out of this.

Ms Averbeke said the internship she was talking about was where they take young graduates and they work with PASA for three years. They earn the salary of a training geologist.

Ms Bikani said she wanted to know the amounts involved in the total budget for the social responsibility projects.

Ms Averbeke said it totaled R1.2 million. Performance against the objectives guidelines were dictated by the Auditor-General. This was determined by what the product was against what PASA would be evaluated by. PASAs performance was always audited.

The Chairperson asked if there was an anticipation of increased seismic events and could she explain this.

Ms Averbeke explained that the seismic survey was a procedure that PASA used to determine what they had underneath the surface. What PASA did was send man-made shock waves into the ground or the surface of the sea. This would induce waves that would assist PASA in determining what kinds of rocks there were under the sea, it had nothing to do with seismic activity.

Mr Sonto asked what PASA was weak in, in regards to non conflicting functions he asked about earlier.

Ms Averbeke said that PASA needed to be strengthened in regards to the increased workload, not the conflict. For example PASA only had four geoscientists working offshore with such a large area. There were only three experienced permanent geologists working onshore, only three people were in environmental compliance and only three were in technical compliance. If they were to fulfill their duties and monitor everything that was happening, it would be impossible. PASA would never be able to fulfill its mandate. 

The Chairperson asked if PASA would be able to handle the new situation of shale gas applications.

Ms Averbeke said this is what PASA had to work with now, without even including shale gas. PASA was stretched to the limit and the addition of shale gas would be the last straw that broke the camel’s back.

Mr Schmidt said that the Auditor-General Report said that there were 18 companies involved in rights, permits and applications offshore and just under 70 rights and permits granted onshore. There were approximately 20 applications in progress - this was a massive amount and he expected to see this in the presentation. Was there a list of who applied and when? He said the Committee was entitled to know who the companies were, what they were applying for and when. Unconverted old order rights were worth R64million and the royalties were payable to the state like she said, but when was the deadline for companies to convert?

Ms Averbeke said that there was no problem with PASA supplying the Committee with names of applicants. The last conversion it had to do was PetroSA.

Mr Tebogo Motloung, Manager: Licensing and Legal Compliance, said that the rights had been granted and the notorial execution was outstanding, which would take place sometime next week.

Ms Averbeke said that the unforeseen income related to the fact of the Mineral and Petroleum Resources Royalty Act. However royalties only went to Treasury with a New Order Form, and if they did not have that, it went to PASA.

Ms Mans said once the conversions happened the provisions no longer applied.

The Chairperson hoped to engage further.

Mr Schmidt requested to know when the list would be received of applicants.

The Chairperson said that Ms Averbeke said she would send it to the Committee Secretary.

Ms Averbeke said the map was available on the website.

Mr Sonto said that staff turnover did not appear in the presentation.

Ms Averbeke replied it was on the slide.

Mr Sonto said it was not enough information.

The Chairperson thanked PASA and the Committee adopted the PASA Annual Report.

Mine Health and Safety Inspectorate 2011/12 Annual Report briefing
Mr David Msiza, Chief Inspector of Mines from the Department of Mineral Resources (DMR), said in 2012 there were 477 261 males to 47 414 females working in mine employment. For 2011 and 2010 Pulmonary Tuberculosis was the most prevalent occupational disease in the mines, mostly found with the gold sector, followed by the platinum sector. Silicosis was the second most prevalent and largely found within the gold sector.

There had been an 18% improvement in curbing fatalities, with the most fatalities occurring within the gold sector, followed by the platinum sector. From 1 January to 29 October 2012, 38 people had died in the gold sector, 22 in the platinum and 10 in the coal. The biggest fatality contributor was fall of ground. Machinery and transport were among other major fatality contributors. Between the months of May and July there was a major spike in deaths, which was similar to last year.

Mr Msiza noted one of the achievements of the Mine Health and Safety Inspectorate was there was no mine disaster accident for the first time in five years. There was also a 19% reduction in fall of ground fatalities from 48 in 2010 to 39 in 2011. There was a review of the Enforcement and Administrative Fine policy and procedures were fully implemented. Eight senior managers attended and passed WITS Executive Development programme.

Challenges were:
- capacity building
- there were 585 applicants for mine surveyor certificates but only 1% passed the examinations
- there were 2371 applicants for mine overseer certificates but only 8% passed the examinations
- skills development
- occupational health
- occupational safety.

Corrective measures that were put into place for capacity building were 19 assistant inspectors were placed in regional offices for experiential training. There was collaboration with the Mining Qualifications Authority (MQA) on a learner inspectors’ programme. There was also a collaboration with MQA to enhance skills development including bursaries, artisans, artisan aides and with miners to correct the skills development challenge. In order to address the occupational health problem there was collaboration with social partners in monitoring the implementation of the 2011 Summit commitments on elimination of silicosis, noise-induced hearing loss (NIHL), TB, HIV and Aids. The Mine Health and Safety Inspectorate also conducted verification of mine sampling on dust measurements and results. In regards to occupational safety there was a directive on start up procedure for mines affected by prolonged stoppages. They encouraged visibility of CEOs and Company Boards at mines.

Mr Msiza explained that in regards to illegal mining the Minister had established stakeholder forums. The Department of Mineral Resources (DMR) and the Council for Geoscience (CGS) had sealed about 108 shafts and open holes between Boksburg and Roodepoort in the past two years. There was also collaboration with relevant law enforcement agencies.

Discussion
Ms Ngele noted that fall of ground had gone down, but asked when was the last one and which mine did it happen at.

Mr C Huang (COPE) asked if there were any new preventative measures for the major fatality contributors.  There was a fire accident a few months ago and he asked what started the fire. He asked if there were any figures on illegal mining fatalities. He asked why there was a high turnover rate at the Inspectorate and wanted to know what incentives were there to keep its staff. He asked what could be done to prevent sexual abuse of women in mines and what were the figures on this?

Mr Lorimer said that mine fatalities had dropped but it would come at a cost of very dramatic production losses. He wanted the report to include Section 54 mine safety stoppages [of the amended Mine Health and Safety Act]. He asked how many stoppages were there, what was the average length of time a stoppage lasted, and what was the shortest time for when a mine was able to get back into production. He asked about partial stoppages and when there was an infraction, did the inspectorate sometimes order a shaft close instead of whole mine closure. He wondered what was the Mine Health and Safety Inspectorate’s attitude towards this. When would the Committee see changes in the way Section 54 was applied, what were the changes and what was the response of the industry to the changes? He spoke about the industry’s production loss from [the alleged inconsistencies on the application of] Section 54.

Mr Schmidt wanted to know if the report of recommendations was on the Mine Health and Safety Inspectorate website. He asked if the gender figures for mine employment were dated September or March 2012. With the large spike in mine fatalities during the winter months, he wanted to know if they had also ooccurred in 2008, 2009 and 2010. He was curious why people were not passing their examinations and gave the figures for the 1% pass rate of mine surveyors.

Ms B Tinto (ANC) asked what action was being taken about the sexual abuse of women within mining. Women had a right to work wherever they want, even if it was underground.

Ms Bikani wanted to be reminded of what the acceptable decibel levels were in regards to induced hearing loss. She was concerned about pass rates. Was there a way that DMR or Mine Health and Safety Inspectorate could determine a relationship between salary scales and the different levels of mine workers and if it had any effect on the results. There was a review on the certificates of competency for examination model; she wanted to know how far the processes was and what those developments were.  Did DMR have specialists that ensured what needed to get done would be implemented? She was especially concerned about the pulmonary TB issue.

Mr Msiza told Ms Ngele he would let her know about the last death that had occurred. Some preventative measures put into place were chutes at the bottom of the shaft. Sometimes they were not remotely controlled. Some of the mines allowed their workers to go into the chutes and unblock them, which was dangerous. When doing audits, these were our focus areas. The fire incident could not be extinguished timeously on 30 June and it took three months to close off the area. The cause of the fire was still being investigated. He said that the Inspectorate did not keep statistics of illegal mining but they kept stats in terms of the law. The high turnover rate of inspectors was because they share the same skills as those on the mines but the mines paid inspectors more. There were also not enough skills within the sector so this meant people had mobility and would jump around to different mines.

Mr Patrick Hlabizulu, Board Member of the Mine Health and Safety Council (MHSC), explained that women needed to blow the whistle whenever they come across sexual harassment. Sexual activity was not condoned and they were encouraging male and females to refrain from such practices.

Ms Ngele said that, yes, it had happened and said the question was what the MHSC did about it.

Mr Hlabizulu said they assist to bring charges but he explained that people rarely come forward to report to the Council. These things were linked to culture sometimes. They were explaining to workers that the environment at work was different from other places, where one could say things that normally were not offensive but one could not say it in the workplace.

Ms Ngele replied that a woman was raped in a lift and it was not reported. What happened in this particular case?

Mr Hlabizulu said he would check and see in this specific case what had happened.

Mr Huang said there was not a safe and clear way on how to report sexual harassment. He thought the figures would be alarming if people actually reported cases. He suggested that they promote the reporting of sexual harassment as the first step. He wanted to see the stats on sexual harassment cases.

Mr Msiza said that for Section 54 he did not have the total figures for the year but he would make it available to Mr Lorimer. One could not run a high risk mine without a secondary outlet. A mine needed to make sure there was a secondary outlet because if they did not, there would be a disaster. The law was clear that a mine could not work without a secondary supply of electricity. The number of days stopped depended on the issues mentioned. The Department would do an analysis of Section 54 work stoppages. He was glad to report that some of the CEOs said that they were putting more investment on health and safety because of Department’s efforts.

Mr Lorimer asked if there had been a buy-in from industry into this particular process and when were changes going to be made.

Mr Msiza said that after the report of the task team [constituted to investigate the alleged inconsistencies on the application of Section 54], the Department had started to look at Section 54 itself and now it had started having each regional inspector forward a copy of Section 54 stoppages every week and they reviewed it every week. They had established a tripartite forum where challenges were discussed and how they would deal with them.

The Chairperson said that production was not important when compared to human life; people’s lives were irreplaceable. He did not want Mr Msiza to be apologetic, because if the need arose for a Section 54 or a licence had to be taken away, so be it.

Mr Msiza said they would look into deaths during wintertime because in 2010 it was similar. In regards to pass rates, the Mine Health and Safety Inspectorate was looking into the preparations of examinees. They were looking into the issue of promotions and how to best deal with it. The decibels were about 82 decibels which was the legal requirement. If you had fewer people to appoint, then there was contestation of those few skills.

Dr Lindiwe Ndelu, DMR Chief Director: Occupational Health, explained that there were two types of inspectors. One was the medical inspector, who was a professional nurses with diplomas in occupational health. They check the quality of work being done on OMPs and do investigations. Their responsibility was medical surveillance. There was a challenge with all the economic sectors of the country using the same professionals and they were paid differently. The Inspectorate was looking to increase the numbers they currently had. Audit tools had been developed. The hygiene inspectors did their work underground to check dust and noise levels.

Mr Lorimer said that in regards to Section 54, he agreed some mines should be closed. However, mine owners had told him that stoppages would sometimes be without foundation. He gave an example of a mine in Limpopo that was one of the best coal mines he had seen. Yet two days after he was there, it was issued a Section 54 and was closed for one or two days. There was a pool of water at the bottom of the open mine that was not fixed. He thought it was ridiculous and said he had asked the mine manager what he would do. The manager said he would comply, and Mr Lorimer asked if he would complain. The manager replied that if he complained, he would be victimised. Mr Lorimer had been hearing that some of these mine closures lacked creditability. He asked if the Mine Health and Safety Inspectorate acknowledged some closures lack credibility and whether they were taking steps to make sure they were credible.

Mr Sonto interjected that, in his personal experience, he did not think that was the problem. Section 54 should be applied as required. He would not come to the Committee asking DMR if something was credible or not. He said he was not trying to hack Mr Lorimer.

Mr Lorimer replied that he thought Mr Sonto was trying to hack him.

The Chairperson said the Inspectorate should give assurance to Members that they were following the law.

Mr Msiza said that they were following the provisions of the Act.

Mr Lorimer asked the Chairperson to his place on record his objection to his question being shot down.

The Chairperson said his question was answered.

Mr Lorimer replied it was not and that he had asked if there was any acknowledgment that some of Section 54 stoppages had been….

Mr Sonto interjected and told the Chairperson that this was out of order and that Mr Lorimer was out of order.

Mr Lorimer asked if Mr Sonto was the Chairperson and then said that he saw they had a new Chairperson for the Committee.

The Chairperson asked for the Committee to move on. They adopted the Mine Health and Safety Inspectorate Annual Report.

Mine Health and Safety Council (MHSC) 2011/12 Annual Report briefing
In 2011/12, 12 research projects had been completed. This was the largest number of projects completed in a financial year for a long time at MHSC, which resulted from improvements in research project management processes. There was a challenge in championing mines to report on the projects that were completed. The new initiative under the Mining Charter had addressed this aspect of involvement and implementation of research.

MHSC income made was R69 275 000 and its expenditures were R48 500 000. There was improvement in revenue collection where 90% was collected in 2012 in comparison to 88% in 2011. The surplus for the year was R20 775 000.

The Auditor-General found the following areas of concern with the MHSC:
- adherence to supply chain management (SCM) processes
- HR related issues
- changes to the Annual Financial Statement (AFS).

Corrective measures for SCM was the appointment of a senior SCM person to assist in controls and the training of all senior staff involved in SCM processes. An HR Committee had been established, an overpaid bonus was being recovered and there was a review of controls on bonus payments to ensure no errors. In order to improve its Annual Financial Statement, mock financials were submitted to the Audit and Risk Committee.

In the 2011/2012 period there was:
- launch of the Culture Transformation Framework
- two day summit that focused on the Occupational Health and Safety (OHS) Summit and HIV/AIDS and TB initiatives for mining sector
- reaffirmation on the establishment of the Centre of Excellence.

MHSC undertook the project Changing Minds, Changing Mines to develop a framework into making revolutionary change towards attaining zero harm in the sector.

The Culture Transformation project had 11 pillars: leadership, data, inspectorate, regulatory framework, tripartism, integrated mining activity, risk management, technology, best practice, bonuses and the elimination of racism. The stakeholder prioritised five of the pillars: leadership, risk management, best practices, bonuses and elimination of racism. For each pillar there were minimum standards that clearly outlined the intent, and an action plan that included roles, responsibilities and timeframes.

During the Summit three pillars that were agreed upon for HIV/AIDS, TB and Silicosis in terms of:
- prevention
- treatment, care and support
- research, monitoring and surveillance.

The MHCS would fund the Centre of Excellence in line with an approved Business Plan for the Centre. It would consider the Centre of Excellence as a provider of choice for research and capacity building as the Centre developed its own capacity to deliver.

The MHSC had completed many projects during the year with a few being: Integration of National and Local Mine Seismic Networks, Post Traumatic Stress Disorder in the South African Mining Industry and the Rockfall Elimination Programme. Another research project dealt with personal protective equipment (PPE) and it was found that there was a need to redesign PPE for women in mining to accommodate their anatomical and physiological body structures. There needed to be a greater focus on the health needs of women in mining.

The MHSC continued to work towards the realisation of ZERO HARM at South African Mines. This required tripartism with employers, state and organised labor. The mission in attaining ZERO HARM was to promote the culture of OHS in the mining industry by striving towards ZERO HARM on all health and safety issues.

Discussion
Mr Sonto asked about the Auditor-General findings on overpayment. He liked the establishment of the cultural transformation project.

Mr Schmidt said that one could not take away the bonus system from mine workers because that was not fair. The bonuses should be streamlined with productivity issues. He suggested that the MHSC come up with a formula to streamline these issues.

Ms Bikani said that the regulation of salaries was talked about in their last meeting and it needed to be done.

Mr David Molapo, Chief Financial Officer of MHSC, said that there was a bonus overpaid to one employee and she reported that a mistake was made, and they were taking it out of the salary of that employee over the next six months.

Mr Singh said that the cultural transformation project was welcomed. He wanted to elevate the issue of safety as a part of the bonus process.

The Chairperson asked if the audit report was qualified.

Mr Singh replied that it was unqualified.

The Committee adopted the Mine Health and Safety Council Annual Report and thanked the MHSC for its presentation.

Council of Geoscience invitation
The Chairperson announced that the Council of Geoscience had invited the Committee to celebrations of its 100 year anniversary on Thursday and Friday. Parliament would not allow any oversight until after its Thursday plenary session. The application had been put in, and it might be approved or turned down. The Committee would know before the end of the day. He was skeptical because there had been another event they were going to go to that was also on Thursday and Friday, but permission was not granted because all the Members were needed in the House on Thursday.

Mr M Sonto (ANC) was not pleased that the Committee was turning down the invitation. He asked the Chairperson if all the Committees were grounded.

The Chairperson said it appeared that all Committees were grounded.

Ms F Bikani (ANC) suggested that a few should be released because every time they have invitations and the Committee did not honor them, it gave a certain impression. It created an impression that certain decisions were made in submissive ways towards certain Committees. Perhaps the Chairperson and one or two Members could go; someone needed to go and represent the Committee.  It was also a part of the Committee’s role to be a part of those functions.

The Chairperson explained that it would be difficult to change the instruction. The other meeting had been arranged by HQ and they said no, nobody must be allowed to go. There were only two people that were going to HQ but they were turned down, so not even a representative from this Committee would be able to go. The Committee could write back to CGS and tell them unfortunately the Parliamentary program did not allow travel.

Meeting adjourned.