PARLIAMENTARY Committee on Natural Resources and Climate Change and Natural Resources Justice Network (NRJN) have cautioned government against justifying shortcuts in the Lake Malawi oil exploration process.
The committee and the network said the continued insistence to use the country’s archaic laws in the process will backfire in future.
The government justifies the awarding of oil exploration licences to some oil exploration companies using the old Petroleum Act of 1983 which gives determination powers to the “life president.”
Chairperson for the Parliamentary committee, Werani Chilenga, said it is the understanding of the committee that government will push for the amendment of the law before oil exploration begins to avoid a raw deal like that of Kayelekera Uranium Mine.
“It is always surprising that despite the absence of petroleum policy, the government thinks the process of awarding licences and subsequent exploration exercises are still justified. But we are saying let us have the policy and the new act in place before we push for exploration. We are not against the oil exploration, we are against using shortcuts in the process,” Chilenga said.
He also said the committee is surprised that the government decided to submit a report on oil exploration activities and their environmental impact to the international community without notifying the committee for its vetting.
“Just imagine, as Parliament we knew about the report submission through the media. We are representing Malawians and we are supposed to know whatever will affect them and let them know,” he said.
Natural Resources Justice Network Chairperson Kossam Munthali said Malawi cannot afford to repeat the costly mistakes in the mining and oil exploration industries. Munthali said this time, when there is no major mining activity in the country, offers a very good opportunity for the country to put its things in order through proper legal framework.
“It is the time we are supposed to get rid of all evils and ills that we have done before,” Munthali said. In his State of the Nation Address in Parliament on Friday, President Peter Mutharika said the government plans to review of the Mines and Minerals Act of 1981 to align it with the national Mines and Minerals Policy. He, however, said nothing on what will happen to the Petroleum Act of 1983.
“Government will continue advancing various reforms to support the mining industry in order to help boost the country’s economy by providing competitive mining incentives, equitable shares of profit, sound infrastructure development and local community investments,” Mutharika said.
When he appeared before the Parliamentary Committee two weeks ago Head of Oil and Gas Section in the Ministry of Natural Resources, Energy and Mining, Cassius Chiwambo, said the government will move on with the exploration plans using the old 1983 Petroleum Act.
Chiwambo said the government developed a 13-paged licence which sets conditions to oil exploration and production investors. On May 12 2014, just eight days before the tripartite elections, the Minister of Mining signed production sharing agreements for three of Lake Malawi’s petroleum blocks. The government entered into Production Sharing Agreements with RakGas MB 45 (registered in the Cayman Islands, subsidiary of company from the Emirate Ras alKhaimah) and Pacific Oil.
If oil exploration is successful, the agreements could be in place for thirty years covering exploration, extraction, and closure. According to Malawi’s Troubled Oil Sector: Licences, Contracts and their Implications, report which Oxfam launched on February 13 this year the agreements give Malawi a raw deal and an incoherent fiscal package.
All of Lake Malawi and part of Malawi’s land including the Shire River Basin have been divided into six blocks for exploration of oil and gas and between 2012 and 2014; the government issued six petroleum exploration licences.
In September 2011, the government awarded petroleum exploration licences to private British company Surestream Petroleum for Blocks 2 and 3. In December 2012, South African company SacOil Holdings acquired Block 1.
Pacific Oil was awarded Block 6 and RakGas was awarded Blocks 4 and 5 in October 2013. It also permitted Hamra Oil to enter into a joint operating agreement with Surestream Petroleum and Hamra Oil now has a 51% stake in the two blocks.
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