Mutharika admits Malawi has not benefitted from minerals, reviewing oil licences

President Peter Mutharika has conceded that Malawi has not benefitted from minerals due to poor bargaining at the initial stage, saying government is reviewing six licences issued to prospective investors to explore the availability of oil on Lake Malawi following concerns of irregularities during their award.

Mutharika said in the event that there is oil on Lake Malawi, the process of awarding contracts for drilling will be transparent so that Malawi benefits from its mineral resources.

“I think we need to review the way we award licences to institutions which have the capacity to explore [for] minerals in this country.We will review that and if we see that there were irregularities, the licences will have to be revoked,” said Mutharika in a special programme with taxpayer-funded Malawi Broadcasting Corporation (MBC) at Kamuzu Palace in Lilongwe.

Mutharika said as “a trustee of Malawi Government property and resources” he will not allow them to be exploited.

“If Malawians can’t benefit from these resources, then we will let them [resources] lie idle for the future generations to use, otherwise we have to be wise in these dealings,” he said.

Government awarded six contracts to six companies to explore for the availability of oil on Lake Malawi after revelations that the lake had large deposits of the commodity.

Attorney General Kalekeni Kaphale produced a legal opinion on the 6 oil exploration blocks the government has awarded and the subsequent production sharing agreements the government signed on 12 May 2014.

Kaphale raised concerns that production sharing agreements were signed before production licences were awarded and oil and gas discoveries were made.

He has also called for further investigation into the corporate relationship of three companies (Hamra Oil, RAK Gas and Pacific Oil) that control five out of six blocks, even though related parties by law (Petroleum (Exploration and Production) Act 1983) can only control a maximum of two contiguous blocks.

Rak Gas is owned by the Government of Ras Al Khaimah, one of the emirates of the United Arab Emirates (UAE) while Hamra describes itself as a Cayman Island origin private company.

Pacific Oil says it is part of Vega Petroleum Limited—the privately owned oil and gas entity that has oil producing and exploration concessions in Egypt.

Kaphale also notes that the ministry proceeded to sign production sharing agreements (PSAs) with the companies against advice from the Solicitor General to only agree to PSAs after the oil or gas is discovered.

In 2011, Blocks Two and Three were issued to Surestream Limited, which later farmed to Hamra Oil in a joint operating agreement and farming out agreement. Hamra now owns 51 percent equity in the blocks, according to the opinion.

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