16 NGOs query oil exploration licencing ban lift

Tom Sangala February 23, 2016

432 4 minutes read

A consortium 16 Non- Governmental Organisations (NGOs) under the Natural Resources Justice Network has questioned the rationale behind President Peter Mutharika’s decision to lift the ban on all oil exploration licences and agreements in the country.

In November 2014, the government suspended all licences and agreements to ensure that the licences granted or the agreements signed are for the benefit of Malawians and were done in accordance with all relevant laws of the country,

But two weeks ago, the Minister of Foreign Affairs and International Cooperation, George Chaponda, told journalists in Lilongwe that Mutharika had lifted the suspension.

It remains unclear why such announcement did not come from the Ministry of Natural Resources, Energy and Mining, which is the line ministry.

Among the five questions that the NGOs, operating under Publish What You Pay (PWYP) Malawi, are whether the government has cancelled some of the licences and renegotiated the production sharing agreements in line with the Attorney General (AG) Kalekeni Kaphale’s legal opinion.

In 2015, Kaphale produced a legal opinion for the government’s review of the licences and agreements.

He is on record to have suggested that some licences be revoked or cancelled because three companies RakGas, Pacific Oil and Hamra Oil connected by a thin “corporate veil” acquired more than two blocs, which is illegal in Malawi.

Kaphale also indicated that the corporate relationship needs to be further investigated and believed the Production Sharing Agreements that the Ministry of Mining signed were entered against the advice of the Solicitor General’s office that they should only be entered on confirmed discovery of petroleum.

The NGOs also want the Production Sharing Agreements signed between the oil companies and government made public.

PWYP has also gone further to ask the reasons behind RakGas’s transfer of US$ 235,700 to the government and how the said money has been used

“The Reserve Bank of Malawi’s accounts for the Department of Mines received US$ 235,700 in April 2014. What was this money for and how has this been used?

“This figure and similar queries have been published alongside other payments made by oil companies to government in the Malawi Extractive Industries Transparency Initiative Scoping Study (February 2016, page 40). This is report available from the MWEITI Secretariat in the Revenue Policy Division in the Ministry of Finance, Economic Planning and Development,” reads the statement.

The Consortium continues to query government on when it will review the 33-year-old Petroleum (Exploration and Production) Act of 1983.

“Our legislation governing the oil and gas sector is outdated. For example, it still vests the resources in the “Life” president among many other shortfalls. We would like to remind the government that in 2009 we adopted the African Mining Vision at African Union meetings. The African Mining Vision clearly spells out how resources can be extracted and used: “Transparent, equitable and optimal exploitation of mineral resources to underpin broad-based sustainable growth and socio-economic development”.

“Do the Petroleum Act and other significant laws such as the 1996 Environmental Management Act ensure Malawi lives up to the African Mining Vision? Will Malawians benefit and how the environment will be protected?” the other part of the statement reads.

The NGOs also want the government’s position on the World Heritage Site “Lake Malawi National Park.”

Lake Malawi National Park is one of Malawi’s two World Heritage Sites, recorded for its outstanding universal value and role in biodiversity conservation.

In response to the awarding of oil exploration licences, the United Nations Educational, Scientific and Cultural Organisation (Unesco) initiated a reactive monitoring visit in March and April 2014.

The government was then requested to ensure that no exploration rights are given that cover the park, to create a buffer zone and to extend the park.

The companies in question were called upon to commit to not exploring in a World Heritage Site.

But by December 2015, the government had not responded to Unesco about the World Heritage Site and instead wrote to request an extension on its decision.

“We support the government’s intention to use our resources to develop Malawi in a sustainable in a way. However, we are deeply concerned that if we proceed as we are without transparency and the due process of law all Malawians will lose out. We hope Malawians can keep asking these questions until they are answered,” the statement reads.

PWYP Malawi is a campaign of 16 organisations under the country’s only Civil Society Organisations network for the extractive industries, the Natural Resources Justice Network, which is made up of 33 organisations and founded in 2007.

Some of the NGOs under PWYP are ActionAid Malawi, Catholic Commission for Justice and Peac, Centre for Environmental Policy and Advocacy, Centre for Human Rights and Rehabilitation, Church & Society of Livingstonia Synod, Civil Society Education Coalition and Citizens for Justice.

Others are Economics Association of Malawi, Foundation for Community Support Services, Institute for Policy Interaction, Institute for Policy Research and Social Empowerment, Mabilabo Area Development Committee, Malawi Economic and Justice Network, Malawi Watch, Media Institute of Southern Africa – Malawi, Norwegian Church Aid, Oxfam Malawi and Ufulu Wathu

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.

In addition, the Joyce Banda administration 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.

Less than two weeks before the 2014 tripartite elections, the government entered into Production Sharing Agreements with RakGas MB 45 (registered in the Cayman Islands, subsidiary of company from the emirate Ras al-Khaimah) and Pacific Oil.

These agreements are said to have been signed before any proven discoveries were made which goes against international best practice.

According to Kaphale, it is believed that Blocks 2, 3, 4, 5 and 6 all belong to the same company which is operating under three entities in Malawi (RAKGas, Hamra Oil and Pacific Oil) which is illegal to hold more than two blocks.