Africa Lakes: Regional Offshore Exploration and Production Profile The countries in the Africa Lakes regional grouping Total Oil Production (onshore/offshore): include Malawi and Uganda, and focus on some of No production the major lakes with hydrocarbon activity. Total Gas Production Specifically, hydrocarbon exploration has mainly (onshore/offshore): taken place in Lake Malawi and Lake Albert in Malawi and Uganda, respectively. Lake Victoria is No production another lake of interest, but due to its low level of exploration activity, environmental factors were only considered. Lake Malawi is an African Great Lake in the East African Rift* between Malawi, Mozambique, and Tanzania. It is the ninth largest lake in the world. The Malawian government has divided Malawi’s oil exploration area into six blocks: “three cover the lake and the rest are on land in the north and south of the country along the Rift Valley1.” The prospecting licenses were awarded to South- African based SacOil (Block 1), UK-based Surestream Petroleum (Blocks 2 and 3), the United Arab Emirates’ RAK Gas (Blocks 4 and 5), and Indonesian-based Pacific Oil & Gas (Block 6). Lake Malawi has been listed as a World Heritage site, and civil societies have expressed their concerns about the effects of oil extraction on the lake. Lake Albert is another one of the African Great Lakes, and is the seventh-largest lake in Africa. It is situated between Uganda and the Democratic Republic of Congo. In 2010, London-based multinational oil and gas exploration company Tullow Oil began to accelerate development of the Lake Albert rift basin by purchasing Heritage Oil and Gas Limited’s (a Bailiwick of Jersey company, headquartered off the coast of Normandy, France) ownership of blocks EA-1 and EA- 3A. Tullow estimates that there are approximately 7 billion cubic feet of recoverable oil reserves in the Lake Albert Rift Basin. In March 2011, France’s Total and the China National Offshore Oil Corporation (CNOOC), each took “one third interest in EA-1, 2, and 3A2,” after a memorandum of understanding was signed between Tullow and the Government of Uganda on March 15, 2011. A year later, Tullow signed two “production sharing agreements for exploration of the Lake Albert Rift Basin with the Government of Uganda, allowing Tullow and its partners to complete the farm down3,” which is defined as an agreement in which a “third party agrees to acquire from one or more of the existing licensees an interest in a production or exploration license4.” As a result, operatorship responsibilities of the area was divided between the three partners, with Total and Tullow in charge of Exploration Area-1 (EA-1) and Exploration Area-2 (EA-2), respectively. CNOOC was * A rift is defined as a “long narrow zone of faulting caused from the tensional stress in the earth’s crust.” (http://dictionary.reference.com/browse/rift). A fault is defined as a planar fracture in a volume of rock caused by the earth’s movement. 1 responsible for the operation of the Kanywataba license and the Kingfisher license of the now former Exploration Area-3A. However, the Kanywataba block of Exploration Area-3A was returned to the east African government in 2012, resulting in CNOOC only having ownership of the Kingfisher block. Geology and Geophysics A large part of Malawi is made up of “igneous and metamorphic rocks of the basement complex” (defined as “the assemblage of metamorphic and igneous rocks underlying stratified rocks in a particular region5”), of Precambrian age6.” In addition, Mesozoic and Cenozoic sedimentary rocks are “found in narrow belts aligned parallel to Lake Malawi and extensive Quaternary alluvium7” (materials that are left by the water of rivers or floods, such as sand, gravel, silt, and clay deposits), are found on the lake margins. Seismic stratigraphic analysis of reflection data from Lake Malawi shows that the lacustrine rift environment is quite complex8. “Sediment thickness, subsidence, and structural and stratigraphic complexity are greatest in the northern half of the rift9,” suggesting that the northern half is more structurally mature than the southern half. Seismic reflection and gravity data collected for Lake Albert show that the “basin contains a maximum of 3.1 miles of synrift, dominantly lacustrine sedimentary fill, in two sub-basins separated by a mid-basin10.” Seismic observations point towards the fact that the basin most probably experienced a “long-term change from a continuously open lacustrine, possibly deep lake system in the Miocene or early Pliocene, to an alternating shallow lacustrine and fluvial system in the mid and late Pleistocene11.” Special Operating Conditions and New Cutting-Edge Technologies Utilized Special operating conditions and new technologies are not utilized in this region based on available resources. Methods of Offshore Tender The offshore tendering method in Malawi consists of oil and gas production sharing contracts. The requirements for a petroleum exploration license is that the potential licensee must “be incorporated or established in Malawi or the potential licensee must be approved by the Minister of the Malawi Government responsible for petroleum if it is not incorporated in Malawi12.” Petroleum production licenses, on the other hand, will be granted to the potential licensee “unless the potential licensee is incorporated or established in Malawi13.” The revenue that the Malawi Government can receive from oil and gas exploration and production licenses includes: “fees on application for grant and renewal of the petroleum exploration license and the petroleum production license, annual charges for the petroleum exploration license and petroleum production license, royalty on petroleum recovered at the rate provided for in the license, income tax, and rent resources tax14.” These taxes and fees tend to change periodically, and therefore specific tax and fee rates were not provided using the available sources. 2 Production sharing contracts are also used in Uganda. The production sharing contract “details specific obligations and requirements of the parties to the agreement including work programs and financial obligations, health, safety and environment requirements, and other data and reporting obligations15.” The fiscal regime applied in Uganda consists of royalties, income taxes, and resource rent taxes. The royalty rate is specified in the production sharing contract and is dependent on barrels of oil per day. The income tax rate is 30%, and the resource rent tax is specified in the production sharing agreement. Environmental Overview and Development The environmental impact assessment process (EIA) in Malawi requires site selection, environmental screening, scoping, a detailed impact assessment, identification of mitigation, cost/benefit analysis, detailed design of mitigation measures, implementation of mitigation measures (if needed), and monitoring. An EIA is required for a range of public and private projects16. The EIA process in Uganda is a legal requirement and must be exhaustive and comprehensive, giving due consideration to all alternatives, including the no-action alternatives. Projects that have completed the EIA process will continually be monitored to assess their impact on the environment. If the impacts are detrimental, it is required that the project be ceased17. Natural Resources The African Lakes of interest are Lake Malawi, Lake Albert, and Lake Victoria, all located below the equator on the eastern side of the continent. Malawi, which borders the western side of Lake Malawi, has 4 protected areas along the shores. Lake Albert, on the western border of Uganda, has protected areas that protect parts of its shore, but do not extend into the lake. The number of protected areas associated with Lake Albert is not specified. Lake Victoria, which makes up the southeastern corner of Uganda, has several protected areas associated with its shores that also do not extend into the lake. The total number is not specified18. It is also unclear how many total square miles of the lakes are protected. A high resource value analysis was not performed for the African lakes of interest. However, each of these lakes are rich in flora and fauna in and around the lakes. Malawi has a high concentration of biodiversity, including several endemic species. Lake Malawi is estimated to host around 15% of the global fresh water species. Most of these organisms are haplochromine cichlids, a sedentary freshwater fish with many species endemic to Lake Malawi. Due to their low mobility, many communities are isolated to one specific locality on the lake, leading to several species endemic to certain restricted areas within the lake itself. The level of endemic plant, invertebrates, and mammals is not well recorded in the Lake Malawi region, however it is estimated that this classification applies to over 200 species. Several threatened and endangered species reside in the region as well, though only 11 species have legal protection19. The high level of biodiversity in and around Lake Albert is due to the variety of landscapes in the Albertine Rift region20, including forests, escarpments, savannah, grasslands, wetlands, and deltas. Protected areas of Lake Albert exist only on the Ugandan shores, but political issues hinder adequate protected area management. Proposed oil extraction has potential to greatly harm the fragile ecosystems and many of the residential flora and fauna within. The situation is worse outside of the protected areas, where desertification,