Zambia Revamps Legal Framework, as Tullow Starts Exploration
Zambia has started revamping its legal and fiscal frameworks for the petroleum sector, after a UK company began exploring two northern provinces.
Tullow Oil began exploration work in Northern and Luapula provinces on August 11 and three days later President Edgar Lungu's cabinet approved a bill to amend the Petroleum (Exploration and Production) Act of 2008. If endorsed by parliament which his party dominates, the law is expected to stimulate investment into exploration for natural gas and oil and development of a hydrocarbon industry in the southern African country.
Information and broadcasting minister Kampamba Mulenga said in a statement that the law currently is not investor-friendly enough, and that is why the country's hydrocarbon potential is under-explored. "
The gaps in the current law include, among others, unclear mode for government participation in the sector, lack of clarity of the fiscal regime, and absence of clear licensing system for blocks reserved for government," she said.
Lack of institutional capacity also makes Zambia uncompetitive to attract investments into the petroleum sector.
The government says the law will also provide for the development of a clear and robust fiscal regime that will be attractive to investors, but provide for enforcement of contractor obligations on existing licenses by requiring them to either fulfill obligations or relinquish the blocks. An oil refinery in central Zambia will also be privatised under the new law.
Zambia does not have a petroleum industry but it it believed it has gas and oil deposits in the northern parts of the country and Tullow Oil's newly-launched exploration is the first to be conducted in Zambia. The exploration comes 11 years after a microbial analysis showed that 12 sites in two northern districts were positive for oil and six for gas.
Speaking at the launch of Tullow's exploration programme, Lungu expressed his government's commitment to create a favorable regulatory and fiscal framework to unlock the sub-sector's potential.
An independent energy expert, Johnstone Chikwanda said the new law should be enacted without delay for Zambia to attract foreign investment into natural gas exploration and development. "The industry will also facilitate the growth of other sectors such as transportation for the evacuation of the hydrocarbons and beneficiation," he told NGW.
In West Africa, Tullow operates two significant oil and gas field complexes offshore Ghana, while in east Africa
Tullow is helping to turn Uganda into a future oil exporter and is also exploring in Kenya.
Update: In a political development, Kenya's Supreme Court on September 1 annulled the result of last month's presidential election, citing irregularities; incumbent Uhuru Kenyatta had been declared the winner in that poll, over contender Raila Odinga.
