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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Concerned Citizen
Guest

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.

fazala
Guest

gas mwati?

koloboyi
Guest

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.

Mbowe Mulambia
Guest

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

Che Nkope
Guest

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

Boy
Guest
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.… Read more »
Aron
Guest

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

Twaniche
Guest

Mwabetsa uranium nw u want kubetsa oil and gas

Khamani!!
Guest

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 .

John Muchizi
Guest

Does Malawi have the capacity to negotiate a good deals

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