It will be absurd for Malawi govt. to tamper with oil tenements – Chimwala

Marcel ChimwalaEDITORIAL with Marcel Chimwala

It will be absurd for govt. to tamper with oil tenements

It is good news that government has admitted that there is no adequate legal framework to govern the oil exploration subsector and is now working on reforms for the sector including the development of a policy which will be followed by amendments to the Petroleum (Exploration and Production) Act 1983.

As the Ministry of Natural Resources, Energy and Mining says, it is indeed important to develop a new policy to govern the sector because it cannot continue to use the National Energy Policy (2003) which does not elaborate much on the upstream petroleum subsector leaving much to imagination and discretion.

Worse still, the energy policy does not specifically mention the petroleum resources in the energy mix, but uses liquid fuels as a generic term to encompass all liquid sources of the energy thus lumping together the upstream petroleum with biodiesel, ethanol, coal-bed methane and biomass in development planning and strategy.

We, therefore, support the government’s move to develop the policy and want to appeal to the general public including civil society groups which are always vocal on issues to do with oil resources to offer their contributions to the government on the development of the policy.

It is also a welcome development that the government has planned to review the Petroleum Act regulations which will result in the demarcation of new oil prospecting blocks to be auctioned to oil firms.

We feel auctioning of the blocks is the right way to go because it reduces suspicion of corruption in the award of licences, and the auctioning process also generates income for the government.

However, while we welcome the demarcation of the new blocks, we are against suggestions from some quarters in government that the current blocks are too large and need to be re-demarcated.

We feel such suggestions if implemented will disturb the tenement holders who have just resumed work after a lengthy suspension of oil exploration activities by the Peter Mutharika administration.

We also feel such disturbances will be costly on the part of the investors as the case was with the suspension of exploration effected in 2014.

The government does not have to be too much excited on oil exploration in Malawi to the point of scaring away investors.

We have to understand that Malawi is just lucky to have serious investors in the oil search subsector as it is an untested investment destination for global investors in the sector.

In competing for foreign direct investment with other countries regionally and globally, the other disadvantage that Malawi has is that it is landlocked which makes it expansive and sometimes even difficult for companies to mobilise for exploration activities.

It could also become more difficult or expansive for companies to transport the oil if it is discovered thus taking into account the prevailing low oil prices on the world market.

We, therefore, urge the government to treat the investors with caution because serious investors may become frustrated and pull out of Malawi which could be scaring to other investors interested in Malawi.

Suspension of exploration, renegotiation of contracts and re-demarcation of blocks already held by investors will not help in putting the country on the map as an investment destination of choice. It will, therefore, be absurd for government to tamper with existing oil tenements.

***

This piece was initially published in Malawi’s Mining & Trade Review Issue Number 51 (July 2017).

The full edition is available for download here. This monthly publication is edited by Marcel Chimwala.

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