Oil deals headache

 

A second legal opinion from Attorney General (AG) on Lake Malawi oil exploration licences awarded to foreign firms has called for cancellation of deals involving blocks 4 and 5 belonging to Hamra and Rakgas respectively.

But government is yet to decide on the matter after suspending the deals over a year ago pending review and renegotiation of production sharing agreements.

Minister of Natural Resources, Energy and Mining, Bright Msaka, while confirming that AG Kalekeni Kaphale has urged government to cancel licences of blocks 4 and 5, said Cabinet was yet to decide on the matter.

Msaka said the law on oil production mandates government, prior to cancelling a deal, to give the licensee a right to be heard.

Air aircraft captured in typical oil exploration exercise
Air aircraft captured in typical oil
exploration exercise

“You must understand, first and foremost, it is in the interests of Malawi [to conduct exploration]. I sympathise and empathise with the investors, but I am sure they have the patience to do the right thing,” said Msaka.

“A government decision yet to be finalised because this is a very weighty matter; a heavy matter. We cannot just make a decision that pleases the investors or a decision that leaves us in a legal wrangle,” he said.

The minister dismissed reports that government has attempted to meet the investors, but the companies have shunned it.

According to Msaka, the second opinion suggests that once licences of blocks 4 and 5 have been cancelled, the other concerns over prematurely written production sharing agreements (PSAs) as raised in the preliminary legal opinion will immediately be resolved.

“Blocks 4 and 5 are the only blocks that had production sharing agreements and any cancellation of the blocks will mean cancellation of the production sharing agreements,” said Msaka.

He explained that the AG believes the law was broken in awarding “adjoining or contiguous” blocks to related companies, but said government cannot just cancel the deals as the law stipulates that prior to such move, the licensees should be allowed to defend themselves.

“The primary objective is to find oil for the benefit of Malawians. We appreciate speed is important, but we want to bring genuine transformation,” he said.

Last November, government announced it was suspending the exploration exercise on Lake Malawi, but despite several assurances that Lilongwe was close to a decision on the matter, the standoff continues. Our sister newspaper, The Nation, last year reported on the first legal opinion by Kaphale which, among others, called for cancellation of some licences and further investigation into how the awarding of the licences was conducted.

Justice and Constitutional Affairs Minister Samuel Tembenu, who alongside his counterparts at Mining, Foreign Affairs and Finance sit in a Cabinet task force overseeing the review of the mining deals, refused to comment on the matter.

“I am sure the Minister of Mining has given you a correct position on the matter. We cannot all speak because we are all speaking for the same government,” said Tembenu.

Kaphale declined to comment on contents of the opinion, saying he could only do so upon authorisation from relevant ministers.

“The opinion was requested by government and as a lawyer, my client in this case was Cabinet and only Cabinet can disclose what is contained in the opinion,” he said.

Ben Kalua, an economist at the University of Malawi’s Chancellor College, said the delay to make a decision was another sign of lack of seriousness on the part of government on important national business.

“We have seen such issues for a long time. Investors can only be put off by such actions. It is lack of seriousness and can have diverse effects on our attempts to woo investors. People would rather be attending workshops and draw allowances than sit down in their offices and make a decision that can transform the country; it is a sad episode,” said Kalua.

Efforts to speak to both Rakgas and Hamra proved futile as their country representative Chimwemwe Chikuse refused to comment on the matter over phone and demanded an e-mailed questionnaire which he was yet to respond as we went to press.

Under the Petroleum Regulations, the country is divided into six blocks for the exploration and production of oil.

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