Anti-Corruption Bureau has launched investigation into whether money corruptly changed hands during the rushed signing of production-sharing agreements in regard to three of Malawi’s petroleum blocks just eight days before May 20 2014 elections in the country.
The probe was requested by a range of Malawian civil society organisations and international NGO Oxfam.
The awarding of six petroleum exploration licences between 2012 and 2014, under the former presidencies of Bingu wa Mutharika and Joyce Banda, was fraught with controversy.
Less than two weeks before the 2014 poll, Banda’s government entered into production-sharing agreements with RAK GasMB 45 –a subsidiary of the United Arab Emirates’ state-owned RAK Gas, registered in the secrecy jurisdiction of the Cayman Islands – before any proven oil discoveries.
According to records of the Reserve Bank of Malawi, RAK Gas made an unexplained payment of $235 700 (89-million Malawi kwacha) to the Reserve Bank of Malawi’s account for the government’s mines department.
The company is also alleged to have paid $5-million to Banda’s Mudzi Transformation Trust, which built or renovated houses for the poor in Malawi.
The Malawi government divided Lake Malawi into six segments for oil and gas exploration. It awarded block 1 to Sac Oil of South Africa in 2012, blocks 2 and 3 to the British firm Surestream Petroleum in 2011, Blocks 4 and 5to RAK Gas in 2013 and block 6 to Ghana’s Pacific Oil.
The licenses for blocks 4 and 5 were held by RAK Gas MB45, a Cayman Island subsidiary of the state oil company of the Ras Al Khaima Emirate in the UAR.
Malawi’s graft-busting body, the ACB, confirmed that it is probing RAKGas but declined to provide more details.
“We are conducting investigations in relation to payments made by RAK Gas. The bureau will not be drawn to comment more on the issue as doing so may prejudice the investigation,” said ACB spokesperson Egrita Ndala in an emailed response.
A leaked legal opinion from the Attorney General, Kalekeni Kaphale, in 2015, suggested that some of the licences should be revoked.This was because three of the concessionaires, RAK Gas, Pacific Oil and Hamra oil, which later took over Surestream Petroleum’s concession, were connected by a thin “corporate veil” apparently intended to circumvent the rule that one company could not hold two contiguous blocks.
In an analysis of the contracts published in February this year, entitled “Malawi’s Troubled Oil Sector: Licences, Contracts and their Implications” Oxfam objected that “if oil exploration is successful, the agreements could be in place for 30 years covering exploration, extraction, and closure. These agreements give Malawi a raw deal and an incoherent fiscal package.”
Oxfam and its local civil society partners then asked President Peter Mutharika not to endorse oil exploration in Lake Malawi, saying there were many grey areas that needed to be cleared up.
“Given the purported irregularities around the initial signing of the contracts, ongoing ACB investigation , the absence of transparency in the renegotiations being led by the Minister of Agriculture, Irrigation and Water Development, the lack of a clear petroleum policy [and] an updated Petroleum Act, a completed model contract and comprehensive financial modelling, we are calling on the President not to approve the exploration,” they said.
However, Mutharika has remained defiant on the issue. Malawi’s Petroleum (Exploration and Production) Act, passed in (1983), vests all oversight powers in respect of petroleum products in Malawi in the hands of the President, although it also empowers the responsible minister to conclude agreements.
In a subsequent comment to Mining in Malawi publication, Mutharika indicated that exploration will go ahead.
“Using the available technology, we will get results similar to those obtained through offshore drilling,” he told the journal. “Note that the companies will benefit from non-expenditure of drilling platforms which usually comprise old ocean ships which are designed for oceans and not narrow and rougher lakes like ours. Companies will benefit from non-expenditure on appropriate drilling platforms.”Follow and Subscribe Nyasa TV :