Mining & Trade News

The oil exploration and production subsector is considered as one of the industries with the potential to uplift Malawi’s economy. Mining & Trade Review’s Wahard Betha engaged Minister of Mining Rashid Gaffar to seek clarification on topical issues in the subsector. Excerpts:

1. There are concerns by some stakeholders on the size of Oil and Gas exploration blocks saying they are too big, and that they need to be re-demarcated. What is the government’s position?  Will you demarcate them?

Firstly, let me acknowledge that the Blocks are indeed big. However, this is the case because when the Blocks were being demarcated in 2009, the country did not have a substantial bank of data on the prospects of Oil and Gas. As a result of this, Malawi had to demarcate large Blocks which would help prospecting companies to study Geology of the country at large whilst trying to identify potential areas for Oil and Gas discovery.

Now that there has been exploration work going on with acquisition of some geological information and data, Government will consider re-demarcating the Blocks. You might also wish to know that during consultation meetings for review of Petroleum (Exploration and Production) Act of 1983, such issues were being raised and best international practices were being proposed by key stakeholders to be adopted in order to have sizable Blocks rather than what we currently have.

Should Government wish to re-demarcate the Blocks today, the process will only be applicable to the vacant Blocks and not those with active licences.

2. Following the relinquishment of oil and gas blocks 1 and 6, when should we expect the ministry to release advertisements of the blocks for investors to acquire the tenements?

You might be aware that the Ministry is working on revision and formulation of a number legal and regulatory frameworks. One of the key instruments is the Petroleum Exploration and Production Policy which had already gone through a number of review processes. It is the wish of Government to call for interested investors to make applications once the Policy is approved.

There are a number of issues that are outlined in the draft Policy designed to benefit local Malawians which Government is willing to implement. In this regard it is considered very important to wait for approval of the Policy which is expected to be done very soon then advertisement of the Blocks will be made.

3. I remember under the previous administration, there was an arrangement to review the Petroleum Sharing Agreement signed with Rak Gas because the existing agreement did not present a win-win situation between the investor and the nation. What is the position of the current administration? Are you going ahead with the review position?

It is the Government’s wish that all mining and petroleum contracts are anchored at the interests of Malawians at large. Re-negotiation of the signed Petroleum Sharing Agreement (PSA) started some years ago but it was put on hold pending finalisation of the draft model PSA. This was done so to ensure that the outcome of the re-negotiation should reflect the interests of Malawians as captured in the model PSA.

Currently, there is a draft model Petroleum Sharing Agreement (PSA) which the Ministry is working on with the Ministry of Justice and Constitutional Affairs to have it finalised. Once this is completed, Government will fast-track re-negotiation of all contracts that are deemed not properly signed.

4. There was also an arrangement to develop a standard petroleum sharing agreement for Malawi. How far have you gone with the process?

As alluded to in the above statement, there is a draft model PSA which was developed in consultation with the Ministry of Justice and Constitutional Affairs. There are also international development partners that are helping to review the draft model PSA to provide relevant expertise from international best practice perspective. Currently, the Ministry has planned a number of activities to have the model PSA finalised as soon as possible.

5. All in all, what is the position of the new government on oil exploration? Do you support oil exploration ventures?

The Tonse Government has total support for Oil and Gas exploration. As you are aware that currently, there is no any Oil and Gas discovery made. However, the sector has huge potential to boost economic status of the country if well managed when discovery of deposits of economic value is made. This is one of the sectors that many Malawians can be actively involved in their socio-economic activities ranging from businesses to employment.

Considering all economic benefits that the country can realise from the sector, Government is rendering all support it can in order to create an enabling environment for investment of both multinational Oil and Gas companies and local entrepreneurs.

6. Please provide any information you feel is important to enlighten Malawians on the reforms that government is undertaking in the upstream petroleum subsector. You may also provide any information that shades more light on the issue of oil prospecting in Malawi.

In preparation for the future Oil and Gas discoveries, Government is in support of the major reform areas in the sector. These include review of the Petroleum (Exploration and Production) Act of 1983, formulation of the Petroleum Exploration and Production Policy, formulation of model PSA and review of relevant laws such as Taxation Act to create a conducive environment for investors whilst ensuring maximum benefits to Malawians.

Malawians may also wish to note that the companies that have been operating in the country have been reporting good progress in terms of the Geology of the country in relation to Oil and Gas occurrence. There are target areas with high potentials which have been identified for further studies. Such developments are giving hope in search for Oil and Gas from the time the country did not have such information and data to present. Government is willing to support the investors until such a time breakthrough is achieved in the upstream petroleum sector.

Let all Malawians be assured that the Ministry is striving hard to have up to date legal and regulatory frameworks which aim at ensuring that Malawians are involved in the Oil and Gas cycle and they are benefiting from activities happening in the sector.

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