Investigate Malawi’s Oil Contracts

President should not approve addendum to 30-year agreements

Lilongwe, 27 February 2017 – On 12 May 2014, eight days before the elections, the Minister of Mining signed production sharing agreements for three of Malawi’s petroleum blocks. If oil exploration is successful, the agreements could be in place for thirty years covering exploration, extraction, and closure. These agreements give Malawi a raw deal and an incoherent fiscal package according to an analysis of the contracts Malawi’s Troubled Oil Sector: Licences, Contracts and their Implications, launched 13 February 2017 by Oxfam.

For over a year, we as the Natural Resources Justice Network (NRJN) and Publish What You Pay (PWYP) Malawi have been calling for greater transparency and answers to outstanding questions related to these contracts.¹ We have tried to access the agreements formally, but unsuccessfully, through the Malawi Extractive Industries Transparency Initiative multi-stakeholder group.²

Government officials were finalising a model contract for negotiations with the companies in early 2014. But the model agreement was not complete and Government officials were pressured to begin negotiations with RAK Gas and Pacific Oil. The Solicitor General explicitly advised that the agreements should not be signed and government negotiators asked for more time. On 12 May 2014, the negotiations were completed in secret and the contracts signed on 12 May 2014 by the Minister and Principal Secretary of Mining.
On 22 December 2014, the Attorney General (AG) was instructed to provide legal advice on whether or not the signed agreements were in the best interests of the people of Malawi and complied with law. But the AG appears not to have examined why the contracts were signed days before the election, why the final negotiations were taken out of the hands of the established negotiating team, and whether payments by oil companies to Malawian organisations were in any way linked. Subsequently, the Anti-Corruption Bureau has confirmed an investigation into payments made by oil companies to Malawian organisations around the time that the contracts were signed.

A few months ago, government officials negotiated a draft addendum revising the fiscal terms for the RAK Gas agreements. Government preparations seem inadequate. Many weaknesses in the existing contracts were not even discussed. Furthermore, as fiscal terms cannot be assessed in isolation (they make sense only as a package), they should be analysed through an economic model designed specifically for Malawian petroleum potential and Malawian fiscal terms, and benchmarked against peer countries in the region. There is no evidence that these preparations were made.

Given the purported irregularities around the initial signing of the contracts, ongoing Anti-Corruption Bureau investigations, the absence of transparency in the recent renegotiations, the lack of a clear petroleum policy, an updated Petroleum Act, a completed model contract and comprehensive financial modelling, we as NRJN and PWYP Malawi are calling on the President not to approve the addendum until a full public inquiry has been concluded into the current agreements.

• Download the report Malawi’s Troubled Oil Sector: Licences, Contracts and their Implications here
• Contact NRJN Chair Kossam Munthali [email protected] and PWYP Chair William Chadza [email protected].

1 Among other press releases, Human Rights Watch, NRJN and Centre for Law and Democracy, 25/01/2017, ‘Malawi: Information Bill Aids Mining Communities’, and Publish What You Pay Malawi, 18/02/2016, ‘Five Unanswered Questions on Exploration of Oil and Gas in Malawi’s Lake and Land’
2 See for example, Multi-Stakeholder Group meeting minutes from April 2016 onwards, available from the Malawi Extractive Industries Transparency Initiative Secretariat, Ministry of Finance, Economic Planning and Development