amaBhungane: Malawi oil contracts under probe

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 hotly contested poll in May 2014, Banda’s government entered production-sharing agreements with RAK Gas MB 45 – a subsidiary of the United Arab Emirates’ state-owned RAK Gas registered in the secrecy jurisdiction of the Cayman Islands. The deal was reached before any proven oil discoveries.

According to the records of the Reserve Bank of Malawi, RAK Gas made an unexplained payment of $235,700 (89-million Malawi kwacha) to the Reserve Bank’s account for the government’s mines department before the exploration licences were handed out.

The unusual wire transfer was picked up and queried by independent consultants LBN Strategies of Cologne, Germany, and Lilongwe-based Resources M&E while examining the Reserve Bank’s accounts as part of a scoping exercise for government.

Last year RAK Gas’s Malawi country manager, Chimwemwe Chikusa, told the Centre for Investigative Journalism Malawi that the payment was for licence fees and the annual ground rent on the oil concession.

Malawi’s non-government pressure group for the extractive industries, the Natural Resources Justice Network, was unconvinced. “What was this money for and how has it been used?” it asked in a press release.

Sources in the Anti-Corruption Bureau, as well as senior members of Banda’s People’s Party, who asked not to be named, also queried a pre-election payment of $5-million by RAK Gas to Banda’s Mudzi Transformation Trust, which built or renovated houses for the poor in Malawi.

Chikusa and Banda’s spokesperson, Andekuche Chantunya, both told the CIJM that the donations were part of the company’s corporate social responsibility programme.

The Malawi government divided Lake Malawi into six segments for oil and gas exploration. The licences 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 RAK Gas 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 e-mailed 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, 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 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, the 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, 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. Malawi’s Petroleum (Exploration and Production) Act, passed in 1983, vests all oversight powers in respect of petroleum products in Malawi in the President, although it also empowers the responsible minister to conclude agreements.

In a subsequent comment to Mining in Malawi, Mutharika implied that exploration will go ahead.

“Using the available technology, we will get results similar to those obtained through offshore drilling,” he told the journal. DM

This story was produced under the aegis of the Centre for Investigative Journalism (Malawi) in association with the amaBhungane Centre for Investigative Journalism.

Photo: Then president of the Republic of Malawi Joyce Banda attends the World Energy Forum during the first day of the programme at the Dubai World Trade Centre October 22, 2012. REUTERS/Jumana ElHeloueh

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