Lake Malawi oil exploration turns fishy

The process of awarding oil exploration licences targeting Lake Malawi and other areas was so fraught with irregularities that the Anti-Corruption Bureau (ACB) took preliminary steps to investigate senior government officials.

In separate interviews, two former ministers of Natural Resources, Energy and the Environment – Goodall Gondwe and Grain Malunga – and other technical officials who spoke anonymously, provided evidence of irregular procedures that could have led to unqualified and/or not evaluated companies getting licences to explore oil in Malawi.

At the centre of it all was how the Ministry of Natural Resources, Energy and the Environment recommended to the late president Bingu wa Mutharika and a Chinese firm, Sogecoa, to be given the exploration licence without adhering to bidding processes at the expense of other companies that qualified after a technical evaluation.

Sogecoa, the company that built the New Parliament Building and Golden Peacock, the five-star hotel near Capital Hill in Lilongwe, never submitted any bid in response to Government of Malawi adverts and was not, therefore, evaluated.

Yet, the ministry recommended a few months ago that they get a licence. Sogecoa even says it is now worried that the coming in of the new government could put spanners in their quest to explore oil in Malawi.

Sogecoa was not among the six companies – Surestream, Sankara, Ophir, SacOil, Tillow and Lonrho – that applied when the Malawi Government advertised for licences.

Both the Principal Secretary for Natural Resources, Energy and the Environment and Gondwe confirmed that Sogecoa did not apply.

Yet, Gondwe also acknowledged in an interview on Friday that Sogecoa was recommended to Mutharika for possible licensing.

ACB got a complaint on the issue because Sogecoa had paid $200 000 (K56 million) to Ben Botolo, the Secretary for Natural Resources, Energy and the Environment to influence the award of a licence.

This prompted the bureau to write the secretary for Natural Resources, Energy and the Environment on the matter in a letter reference number ACB/LL/474/2011, dated March 16 2012.

“The bureau has reviewed the complaint and is of the view that your office is best placed to comment on the issue. You are, therefore, being requested to comment on the matter and revert to the bureau at the quickest possible convenience.”

In the letter signed by assistant director Victor Banda, the ACB also alleged that Sogecoa was using Chinese National Oil Exploration Company as a front in their bid to obtain a licence.

But Sogecoa officials said in an interview that Chinese National Oil Exploration Company is its partner.

On Monday, PS Botolo said the allegations were unfounded.

“I challenged ACB to bring me evidence. In the first place, how do they write me instead of them investigating and showing me what they have discovered? They want me to do the job on their behalf?” he wondered.

In a separate interview, Emily Chen, Sogecoa projects coordinator, confirmed they did not apply for the licence along with everyone else but denied bribing anyone to be considered for the exploration licence. She also confirmed partnering the Chinese State firm.

“We did not apply because our company came to Malawi firstly to do the construction then later we wanted to be involved, that is why we were late,” she said.

Chen confirmed meeting officials at the Ministry of Natural Resources, Energy and the Environment and the Geological Survey Department in Zomba to push for the licence, but said there was nothing fishy about those meetings.

Asked what happened to Sogecoa’s push for the licence, Botolo said the firm failed to get the licence because they wanted the same blocks awarded to Surestream.

“Currently, we have several companies looking for oil explorations. Those that were recommended by the [evaluation] committee will still get their licences,” said Botolo.

On the other hand, Gondwe said Sogecoa was recommended to be awarded Block 4 “but they declined and withdrew,” a sharp contrast to the company’s position because Chen insisted they are still interested and that their only worry is that a change in government could hit their plans.

Asked why they should be worried by a change in government, Chen said the new regime could bring new policies that maybe unfavourable to them.

“We hope they would reopen the bid process if the policies have not changed with change of government,” she said.

According to experts, the licensing process normally goes through three main stages, starting with the tendering process, followed by expert assessment. A technical team then recommends to the minister for the award of the licence.

The oil exploration bidding exercise started in 2010 when Malunga held office.

In an interview last Friday, Malunga noted that there were a lot of irregularities in the licencing process, questioning why some companies, such as Surestream, kept meeting the then president over the licences.

Malunga alleged there was pressure from State House to award Surestream a licence but “I had put my foot down because it was me who was supposed to vet them and then make recommendation to [the president] not the State House directing me to issue a license.”

“Perhaps that is one of the reasons why I was dropped because I wanted to bring sanity to the process,” claimed Malunga.

But his claims in the case of Surestream contradict those of a member of the licence evaluation team, who said Surestream passed the rigorous assessment process leading to its award of the licence.

“Probably what [the former minister] should be worried about is why the other two firms that were recommended for the licences have not got them two years down the line,” said the member who spoke on condition of anonymity.

Information from the technical committee which included members from the Ministry of Energy, Geological Survey Department and the Malawi Police Service, among others, shows that three companies – Surestream, Sankara and SacOil, qualified for a licence. Only Surestream got one.

In an interview to explain the demarcation of blocks, Geological Survey Department director Dr. Leonard Kalindekafe said Lake Malawi and other parts earmarked for oil exploration have been divided into six blocks. Surestream were awarded a licence to explore for oil in Blocks 2 and 3 on Lake Malawi.

In an e-mail response to a questionnaire, Surestream chief executive officer Christopher Pitman said the blocks were awarded to them “on the basis of technical merit and competence which were assessed by a special committee which was set up solely for the purposes of evaluating all tenders from interested oil companies.”

“I understand that Surestream Petroleum scored the highest points for both blocks and was recommended to be awarded the permits. We only bid for Blocks 2 and 3 which we were subsequently awarded. The Ministry of Mines, Energy and Environment did not award permits 1, 4, 5 and 6 for reasons we do not know,” said Pitman.

Nonetheless, Pitman confirmed meeting the late president Bingu wa Mutharika on two occasions before and after the licence was issued.

He said on both occasions, “the meetings were to explain the nature of our exploration activities and the possible economic benefits to Malawi.”

“I met the former president once in Blantyre, one year before the permits were awarded, and once in Lilongwe earlier this year. The former president was also very concerned about any possible negative impact on the environment. I cannot imagine that these meetings were in any way the reason Surestream was awarded the permits and it is sad that this has been stated,” he said.

“Surestream Petroleum is a strong believer in investing in the country and to date, we have already spent in excess of $500 000 [about K140 million] on social investment programmes,” he added.

The 1983 Petroleum and Exploration and Production Act vests all powers to control petroleum products in Malawi in the hands of the President.

However, the Act also empowers the responsible minister to conclude agreements. According to Malunga, this is why it is not necessary for a company to have any direct dealings with the Head of State.

Section 10 reads in part: “With the consent of the Life President, the Minister on behalf of the Republic of Malawi may enter into an agreement with any person with respect of ….. (a) the grant to that person or any person identified in the agreement, of a licence on the conditions…specified in the agreement.”

But Gondwe, pressed on why he recommended to the president that Sogecoa should get the licence when the law does not compel him to, said: “Yes, I can make a decision as minister, but the practice has been that the President participates.”

Fast facts

. Malawi, which lies on the Great Rift Valley, has potential for oil exploitation.

. Potential areas have been divided into six parts (blocks) covering the whole Lake Malawi, Vwaza Marsh, Lake Malombe and Shire Valley.

. Studies have concluded that Malawi has a potential of discovering hydrocarbons (oil and gas).

. Surestream Petroleum, currently exploring oil on Lake Malawi, has offices in Reading, Paris, Dubai, Kinshasa, Luanda, Bujumbura and Lilongwe