Oil discovery and expectations
It is easy to be overly excited with the recent hype about the discovery of oil and gas deposits in Malawi. We have long wondered about how unfortunate the country was for it to be the only one on the continent not to be endowed with any significant mineral resource. With the discovery of uranium and now oil and gas we can rest assured that we are as blessed as other mortals elsewhere in Africa.
But this does not mean we should jump into oil drilling without thinking. The oil resource in Africa is associated with the notion of the oil curse for a good reason. In most African countries where oil has been discovered and exploited, oil has been the major cause of internal conflict, political instability, endemic corruption and general economic malaise. Far from providing the impetus for development for local communities and their countries, oil exploitation in Africa has been linked with environmental pollution and the marginalisation of the communities located where oil extraction and related activities take place.
The most common reasons for these negative effects of oil exploitation in Africa have to do with lack of appropriate legislative frameworks within which these activities are undertaken; lack of transparency in the processing and adjudication of prospecting and exploitation licences, in the conclusion of the relevant contracts with oil companies, and in the negotiation of profit-sharing agreements between government, oil companies and communities; and lack of robust, independent and effective regulatory and accountability mechanisms.
So far, the whole business of exploration and licensing in Malawi has been conducted under a cloak of secrecy. Neither has Parliament nor the general public been involved at every stage at all or in a meaningful way. There is no clear and transparent government policy that articulates the national objectives, principles, procedures and mechanisms pertaining to this important natural resource. The existing legislation is outdated, enacted as it was at the time when it was not considered probable that such a resource could be discovered. Without both a sound policy and suitable enabling legislation, Malawi is embarking on an oil exploitation path that predictably leads to the oil curse.
Most pressing is the need to seriously debate the pros and cons of offshore drilling. We might consider oil as the natural resource we have been waiting for, but it would be foolish not to recognise that Lake Malawi is itself an important and unique natural resource. It offers us fresh water in abundance, holds in its liquefied bosom a diverse range of unique fish species, and above all, offers the natural beauty that has attracted many tourists before and can attract more, with properly planning, commitment and dedication.
The risk of offshore oil drilling to this beautiful lake is too high to be ignored. The government needs to convince the public and Parliament why it thinks drilling in such an important resource is economically, environmentally, socially and politically desirable; that the drilling presents no risk of environmental damage; and that this whole enterprise is profitable, including disclosing all relevant evidence and sources that support its case.
As Malawi is counting her blessings on the oil front, many other neighbouring countries are also doing so. Mozambique is celebrating the discovery of about 85 trillion cubic feet of natural gas, 50 trillion cubic feet of natural gasinTanzania, about 500 billion cubic feet of natural gas in Ugandaa and significant oil reserves in Kenya and Ethiopia.
There are no indications that all these countries are talking to each other about these developments. For our part, we need to consider the profitability of the whole project, given the stiff sub-regional competition and the risk to the fresh water resources we have.
One benefit to multilateral talks lies in the huge, and seemingly complicated, issue of oil refining. In Nigeria, where oil has been exploited the longest, crude oil is exported and refined oil imported back at significantly higher prices. Discussions about a possible joint refinery could help lower the costs of domestic consumption and probably improve the competitiveness of oil exports to neighbouring countries as well.
Malawi badly needs to expand its base of revenue as international aid is shrinking, but this should not lead us into a desperate oil rush. We risk being slighted by the so-called oil curse that has smitten many of our African brothers and sisters elsewhere on the continent. n
* Danwood Chirwa is Professor of Law, University of Cape Town.
