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Malawi government justifies oil contracts delays

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Malawi government has indicated it is no hurry to act on the oil and gas exploration contracts which it suspended last year.

The administration of President Joyce Banda granted licences to several foreign firms for oil and gas exploration on Lake Malawi.

But the government of President Peter Mutharika suspended the deals arguing they needed to be reviewed.

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It tasked the Attorney General, Kalekeni Kaphale, with scrutising how the deals were awarded upon which he would have to provide a legal opinion as to government would proceed.

Kaphale released his opinion in May in which he found that production sharing agreements for the deals were signed before production licences were awarded and before oil and gas discoveries were made.

Kaphale also made reference to the fact that according to the Petroleum (Exploration and Production) Act of 1983, a company can only control a maximum of two contiguous blocks.

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Now, three months after that decision was made, government is yet to make a move on the matter, leaving the whole exploration exercise in suspense.

And when asked what Government is trying to achieve in delaying making a decision on the deals, Principal Secretary for Natural Resources, Energy and Mining, Ben Botolo, argued that government believes that all resources have to benefit people of Malawi.

“Current and future generations have to benefit from the mineral wealth of the country. In reviewing [the licences], government wants to ensure that contracts were entered into in proper manner and have those beneficial elements as outlined for Malawians,” he said.

Botolo also dismissed suggestions that government could pay heavily if it cancels the licences.

“No one at this stage has said that the contracts will be either cancelled or honoured. However, it will depend on the legality of the matter. If licenses were entered into without following the laws government has the responsibility to ensure the law is upheld.

“The government will not cancel licences for the sake of cancelling. It has to protect its citizens,” he said, adding that the suspension had nothing to do with the fact the deals were entered into by the previous government.

Botolo also said government does not subscribe to the school of thought that the country has to seize the opportunity to award the contracts to companies that are willing to exploit the resource even in the face of falling global oil prices.

A report on the airborne geophysical survey which government conducted recently found that Malawi is sitting on significant oil and gas deposits.

In 2012, government licensed SacOil for exploration in Block 1.

Block 2 and 3 were originally licensed to Surestream Petroleum in 2011 but the British firm farmed out 51 percent share of each block to Hamra in February 2014.

Block 4 and 5 were awarded to RAK Gas while Block 6 was awarded to Pacific Oil and Gas both in 2013.

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