Govt changes tune on Lake Oil Deals – The Nation (Malawi)

Govt changes tune on Lake Oil Deals – The Nation (Malawi): Clears Rak Gas, Hamra to explore oil on Lake Malawi

By Golden Matonga, News Analyst, 16 October 2016

Government has made a u-turn on suspending oil exploration on Lake Malawi involving Hamra and Ras al Khaima Gas (Rak Gas) after clearing them of any wrong doing.

A second legal opinion from the Attorney General (AG) Kalekeni Kaphale late last year had called for cancellation of deals involving blocks 4 and 5 on Lake Malawi as the AG believed then that a law had been broken in awarding “adjoining or contagious [sic] blocks” to related companies of Hamra and Rak Gas.

But Kaphale told Nation on Sunday in an interview that government investigated the link between the two companies after documents related to the sale of deed of oil exploration licence by Surestream Petroleum Limited to Hamra Holdings Limited dated December 2013 named Rak Gas as a guarantor of the agreement in its capacity as sister company of Hamra.

This document is the reason why we summoned these companies and investigated the matter. While previously I indicated that this was illegal, I have reviewed my position just like any other lawyer does and we have now allowed both companies to go ahead with the exploration,

said Kaphale.

Quizzed what information has informed his change of heart, Kaphale insisted the decision to allow the exploration was both with “legal and factual” basis.

On December 22 2014, government asked Kaphale to provide legal advice on various issues relating to licences, including whether Hamra Oil lawfully acquired the equity stake in Surestream prospect but the AG said then:

My advice is as follows [a] We must cancel all exploration licences or at bare minimum, licences for blocks Four, Five and Six as having been entered into with parties that are related to Hamra Oil Limited, which has controlling interest in the two blocks as these are the maximum a party can get.

Energy and Mining Minister Bright Msaka also confirmed that the ministry, through Principal Secretary for Energy and Mining had written the companies assuring them of their blocks following advice from the Attorney General.

It is legal position. So, the person best to get the details is the AG. After he reheard their position, the PS in the energy acted on the basis of the legal opinion by the AG. It’s important for you to understand the legality of the matter so that you appreciate that the document does not indicate the two companies contravened the law. From what we heard as ministry. After the suspension Rak Gas were heard in writing and orally, it seems the basis of the decision is not just the document you have,

said Msaka

Reinford Mwangonde, Executive Director for Citizen for Justice, a governance and sector civil society group working in the extractive industry said government should not send a wrong signal.

As for what the decision symbolizes, it means government doesn’t learn lessons because we have taken the same path of granting permits on Oil and Gas when we don’t have stringent policy and legal instruments to regulate the sector; the same mistake we did with Kayelekera and we crushed.

The policy and legal frameworks regulating the Oil and Gas sector is archaic and weak as in the case of the Petroleum and Exploration Production Act-(PEPA) and other relevant legislations, the government has not set up a special Oil and Gas to regulate the sector and then we don’t have technically competent engineers and personnel to regulate the sector by dealing with the industry that will come into our country. We shouldn’t be outnumbered by the industry’s professionals who have to tell our technocrats what to do,

added Mwangonde.

Rakgas representative Chimwemwe Chikuse could also not be reached for comment as his phone went unanswered despite several attempts to reach him.

In a document Nation on Sunday has seen, Rak Gas LLC is mentioned as a company organised and existing under laws of Al Khaimah with its principal office located at Rak Gas Building, Al Jaza Road, United Arab Emirates while Hamra registration number 05238607 has its office at Intertrust Corporate Services (Cayman) Limited, Elgin Avenue, George Town, Cayman Islands.

The Guarantor in its capacity as sister company under common control with Guaranteed Party hereby irrevocably and unconditionally guarantees to Company, the full, faithful, punctual performance and observance by guaranted party of each and every on of its obligations and undertakings to be carried out, performed or observed in Guranteed PArty to the extent and under the terms of conditions and subject to the limitations set forth in the agreements,

reads part of the agreement.

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. Blocks 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 wherease the sixth block went to Pacific Oil.

Six petroleum exploration licences awarded in Malawi (2011 – Surestream Petroleum Blocks 2 & 3, now Hamra Oil has 51% majority stake; 2012 – SacOil Holdings Block 1; 2013 – RAKGas Blocks 4 & 5 and Pacific Oil Block 6)

Note – two clarifications on the article: 

• Malawi and not Lake Malawi is divided into six blocks for petroleum exploration. Three block are on land and three cover the Lake (see image). This is determined in these Petroleum (Exploration & Production) Act regulations.
• The article indicates that one company holding two blocks is not permitted. According to the same regulations, “3.(2) The minister may consider an application in respect of more than one block but not more than two blocks where he is satisfied that special circumstances exist for doing so.”