Malawi to renegotiate oil, gas deals – Report

Malawi government is set to cancel, then, renegotiate production sharing agreements (PSAs) with companies licensed to explore oil and gas in the country, Minister of Justice and Constitutional Affairs Samuel Tembenu has confirmed.

Tembenu: Deal to be renegotiated

Tembenu: Deal to be renegotiated

According to published reports on Sunday, government has completed reviewing the matter and that a final announcement will be made soon, after a meeting with oil companies planned for next week.

Tembenu said although government has made a position on the matter and the announcement of its decision awaits a meeting with the companies next week.

“We have completed our process of review. The final decision will be announced soon. As I speak, I have been writing a Cabinet member on the matter,” said Tembenu , who sits on a Cabinet Task Force appointed by President Peter Mutharika to review the process.

Ministers of Foreign Affairs; Energy and Mining; Finance, Economic Planning and Development also sit on the task force.

Tembenu, who was quoted in the Nation on Sunday, declined to state the specific outcomes of the review, especially on the matter of PSAs’ cancellations and the decision to renegotiate the same.

But the paper relying on undisclosed sources close to the oil exploration review process reported that the PSAs are set to be cancelled.

The paper’s report explains that under the PSA, a licensed company extracts and develops the resource in return for a share of the production.

Normally, the company meets exploration and development costs, as is the case in Malawi at the moment.

PSAs usually specify a portion of total production that can be retained by the contractor to cover costs; hence, it is called ‘cost oil’.

The remaining oil is called ‘profit oil’ and is divided between government and the contractor based on the agreed PSA formula.

Malawi’s current PSAs have nearly all the elements of royalties, equity, income taxes and even the R-factor, reported Nation on Sunday citing a Capital Hill officials with knowledge of oil and gas licences.

Currently, government has suspended the whole process of oil exploration on the lake, pending conclusion of talks on the matter.

Lake Malawi is divided into six segments for oil and gas exploration with Block One awarded to Sac Oil Holdings Limited of South Africa in 2012.

Whereas Block Two and Three were awarded to a British firm Surestream Petroleum in 2011, but in 2013 Hamra Oil Holdings acquired 51 percent stake in the Surestream licences. Blocks Four and Five were awarded to Rak Gas in July 2013 whereas the sixth block went to Pacific Oil.

Rak Gas—owned by the Government of Ras Al Khaimah, one of the emirates of the United Arab Emirates (UAE)—has since carried out Full Tensor Gravity Gradiometry (FTG).

On its part, Hamra—a Cayman Island private company that bought 51 percent into Blocks Two and Three from Surestream with the approval of the Malawi Government—also carried out an FTG last year.

Pacific Oil, which is part of Vega Petroleum Limited—the privately owned oil and gas entity that has oil producing and exploration concessions in Egypt—and Sacoil are yet to launch exploration activities.

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20 thoughts on “Malawi to renegotiate oil, gas deals – Report”

  1. Concerned Citizen says:

    Goood job, go ahead. Mwina tingachoke mu umphawi.
    Amene sakugwirizana nazo apite ku South Africa. akakumane ndi Kwazulu hunting group. Koma ife tikuti macoys awa ayambitse msanga mining, anthu apeze ntchito.

  2. fazala says:

    gas mwati?

  3. koloboyi says:

    politicians will need something very huge from the deal and poor malawians will benefit nothing.Do it with extra care so that Malawians should also benefit from the deal.

  4. Tulo basi uphawi ulito mugagwirizane chani agokubelanipo basi as you did with uranium it was the same DPP watch out Malawian

  5. Che Nkope says:

    The best was to hire legal and economic experts from countries where these oil companies come from. Failing which your contracts are a non starter. Becareful with politicking and this will not benefit the nation atall

  6. Boy says:

    This is a very good development for the Malawi nation. These processes are not as easy as slicing butter, we have already learnt something from Kayelekera Uranium mine. I believe that we are going to have the best deals for our oil. However, I dont support the indulgence of the CSOs, they are confusionists, look at what Mtambo of CHRR is talking on the radio, we cant allow people of this calibre to sell our country to accept same sex marriage. Remember, too many cooks spoil the broth. The available structures are enough to bring good results for our country. GOD bless Malawi.

  7. Aron says:

    All the forwards people in Malawi are stupid they will blinded by those companies to negotiate a sharing deal and accept as they did on kayelekela deal Malawi didn’t benefit they don’t even money to improve hospitals in that district no schools. rubbish rubbish

  8. Twaniche says:

    Mwabetsa uranium nw u want kubetsa oil and gas

  9. Khamani!! says:

    Just stop this oil stuff … Malawi is not competent enough to 1) negotiate a fair deal 2) hold the counter party to the deal. People just aren’t serious enough in this country .

  10. John Muchizi says:

    Does Malawi have the capacity to negotiate a good deals

  11. Xander Jimmy says:

    Can you please make those negotiated details public……since those activities have direct impact on people, hence they should be allowed to submit their inputs in what is to be renegotiated……secretive approach definetely will lead to further blunders…..allow CSOs, Parliament, General public etc to decide their destiny, not the way MSB disposal was handled……….My worry is on the license issued to Hamra based in Cayman Ireland which is well known tax haven of which as government you should expect aggressive tax planning which might end up in profit shifting from Malawi to such an Island and to extract information from Cayman Island is also a challenge due to their Banking secrecy, hence if the government is not careful Malawians awombera mmanja gule wa eni!!!…….choncho tikupempha boma chonde tipenyetcheni ivo mukukakambirana pa ma negotiations Mapeto wake tiluzapo vyambo…….mumaboja akuti kubwera mafuta titukuka…….Like Kayerekera saga

  12. Byron says:

    Too many people in the country trying to show knowledge like they want Malawi to prosper,but all that is said by the so called experts is a mockery to transparency because DPP heavyweights want to control the oil industry in a way they reap enormous benefits from it.Trust me, the renegotiation process is a way to put their tentacles in it and rob the country typical of Nigerian scenario.

  13. Bob says:

    Dont negotiate and renegotiate. Do something concrete you fools.

  14. Concerned citizen says:

    Which legal expert negotiated on Malawi Government’s behalf, who has expertise in these contracts? Assure me that there was a legal expert with experience in oil deals. Also assure me that no leader has a personal stake in these deals.

  15. Alex Likoswe says:

    Remember issues regarding farming in and out. Government has to get a stake in any of these transactions.

  16. mantha ayi says:

    I will sort this out in the next 20 years……… mtima pansi

  17. Mphwache says:

    Just wait and see. Investors need security of their investments, they are prepared to meet the business risks and costs, but not political risks. Malawi is a heavy political risk country, since every government that comes brings its own economic rent which no intelligent investor is willing to bear. We shall talk about foreign direct investment forever in this country, and none will be forthcoming.

  18. Massive says says:

    Koma akikwete mwauza??

  19. Make simple deal Government should negotiate atleast 49% and throw to Malawi Stock Exchange so that all Malawians should have access to own shares.

  20. The real Ujeni says:

    Sleepy people. Too many dunderheads in the country

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