03 November 2023

Compiled by Effort N. Dube and Reviewed by Nyaradzo Mutonhori

1.     Background

Although the country has become somewhat versed in governance of mining for minerals such as gold, platinum, diamonds, nickel and others, the same cannot be said for oil and gas. The tremendous economic benefit from oil and gas should be harnessed to its full potential  through safeguarding against the inequitable sharing of product and/or revenues, or against environmental, social or human rights violations. ZELA seeks to highlight some key areas that can be improved upon or introduced within the legislative framework, either through the ongoing reviews of the Mines and Minerals Amendment Bill and/or Environmental Management Amendment Bill. Whilst passage of the Mines and Minerals Amendment Bill forms part of the urgent legislative agenda for the 10^th Parliament of Zimbabwe, we call upon the resumption of deliberations on the Environmental Management Amendment Bill. ZELA will produce a series of articles, and this is the inaugural piece.

Commercial oil production became a real prospect for Zimbabwe in 2021 when the Government of Zimbabwe entered into a Petroleum Exploration Development and Production Agreement  (PEDPA) with Geo-Associates Pvt Ltd, a company owned eighty per. cent. (80%) by Invictus Energy Limited (“Invictus”) and twenty per. cent. (20%) by One Gas Resources (Pvt) Ltd. Operating under a Special Grant, the project covered 250,000 acres located in the most prospective portion of the Cabora Bassa Basin in northern Zimbabwe. The licence is currently in the second exploration period which runs to June 2024. Invictus entered into an agreement with the Sovereign Wealth Fund of Zimbabwe in August 2022 to increase the licence area to a total of 360,000 hectares. Previously explored by Mobil Oil, the project contains the largest undrilled structure in onshore Africa,  the Muzarabani anticline feature.  

2.     Considerations on the process of acquiring Oil and Gas Exploration and Mining Rights

Oil and Natural gas like any other extractive natural resource in Zimbabwe vests in the President as per section 2[1] of the Mines and Minerals Act [Chapter 24:05] herein after referred to as the “Mines Act.” Therefore, no one can claim to own minerals in Zimbabwe but, they can have a right to extract the resources as provided for in terms of the Mines Act. Section 3 of the Mines Act, stipulates that unless otherwise it is provided under any title deed to land granted prior to the 1st November, 1961, the acquisition of mineral oils and natural gas mining rights can only be acquired in the manner set out in the Act. In simple terms, as long you do not have in possession a title date granted prior to the 1^st of November 1996, which allows you to extract minerals, you ought to obtain the rights through the legislative provisions/processes found in the Mines Act and its subsidiary guidelines and regulations.

In Zimbabwe, the mining rights for mineral oils or natural gases or both, can only be acquired in accordance with a special grant as stipulated in section 298 of the Mines Act. This provision provides that unless one is a holder of a block for natural gas and mineral oils registered in terms of the Mines Act, “no rights to mine mineral oils or natural gases may be acquired except under and in accordance with a special grant issued under…” Part XX of the Mines Act. Part XX goes on to provide the manner of acquiring such rights beginning from section 299 of the Mines Act, which provides that an application for a special grant for oil and gas mining is made to the Mining Affairs Board (herein after referred to as “MAB”). The application is still made to the MAB, even though in this case it is not an issuing authority which awards special grants. The role of the MAB is facilitative in that, it ought to write a report addressed to the Minister of Mines and Mining Development (hereinafter referred to as the Minister) with recommendations on whether to grant or reject the application for special grant sought.

In writing its letter, the MAB must consider various factors which include the financial status of the applicant and whether it would be in the national interest to award such a special grant. Section 300(2) of the Mines Act clearly states the minimum factors that ought to be considered by the MAB inclusive of the ones mentioned above. Furthermore, the MAB’s report to the Minister must be accompanied by recommendations on the minimum capital required for investment, the timeframe to carry out the operations, the minimum rate of production, the royalty that ought to be paid and the annual fee that must be paid to the Minister by the applicant as provided for in section 300 (3) of the Mines Act.

Ultimately, it is the President who has the final say on the issuing of the special grant. Upon receipt of the MAB’s report and recommendations, the Minister ought to submit it to the President for his consent.[2] Faced with the application on his desk, the President may choose to either accept the application with or without terms and conditions or to reject the application. If, the President rejects the application, the applicant cannot institute a fresh application until at least three months have lapsed[3].  It is not clearly stated whether the President ought to provide reasons accompanying his refusal to award the special grant but, administrative justice would demand that reasons be provided.

The rights acquired under this special grant to extract natural oil and gas cannot be ceded or assigned to another person – natural or juristic – without the consent of the President.[4] Moreover, the Mines Act highlights that a provision may be made in a special grant stipulating for the payment of royalties and annual fees on all mineral oils or natural gases,[5] and the procedure for amendment of the special grant where the need arises,[6] and ultimately the cancellation of the special grant. [7]

Unlike the South African legislation[8] which establishes an agency that is designated to micro-manage oil and gas extraction, Zimbabwe’s legislation is silent on that aspect. This leaves the management of oil and gas extraction in the hands of the MAB. The failure to have an independent agency denies the government an opportunity to have experts being in the best position to review project proposals and any project related documents. Critical to note is the fact that the agency which is established under the South African legislation monitors the progress in the oil and gas extraction to “receive, maintain, store, interpret, evaluate, add value to, disseminate or deal in all geological or geophysical information relating to petroleum.[9]” There is value addition for such an agency to be set up in Zimbabwe comprising of experts who will positively contribute to project developments and legal developments. As opposed to an agency that focuses on extraction of oil and gas, Zimbabwe has an agency which focuses on procurement, sale and sufficiency of processed petroleum products such as fuel, liquid petroleum gas (LPG), lubricants produced as by-products of oil and gas known as the Petroleum Regulatory Authority[10].

The rights to mine mineral oils and natural gas can only be acquired through the Mines Act and that is the only legislation that directly mentions acquisition of mining rights. There are still weaknesses on the MMAB which need to be addressed such as the issue of setting up an agency that is made up of experts on oil and gas. In accordance with international best practice, Zimbabwe should consider introducing clauses in the MMAB for competitive contract award process for production licenses to ensure that it secures the most favourable terms. If a public tender fails due to a lack of interested parties, then the act could permit (in those  circumstances only and subject to certain conditions) for the Government to pursue a different procurement method, such as direct negotiation, thereby limiting risk of corruption in the contract award and negotiation process.

In addition, exploration and production rights should be clearly delineated in the MMAB. The holder of an exploration license should not be automatically entitled to production rights over the same geographic area. This is because additional and more detailed data and studies are often collected during the exploration phase, which may cause a government to re‐evaluate the value of future oil production activities and their potential impact. By granting an automatic right of production under the exploration license, a government might therefore, unduly curtail its ability to reconsider whether a project should be allowed to proceed. We note in this regard that, pursuant to the PEDPA, the Government has granted Geo with the right to undertake production for the next 25 years.

3.     Environmental considerations

Invictus completed a comprehensive Environmental Impact Assessment which was one of the largest surveys ever undertaken in the country. The regulator, the Environmental Management Agency, approved the Environmental Management Plan for seismic and drilling. Considering the potential devastating environmental impacts that oil and gas exploration and extraction can have on biodiversity, it is necessary to strengthen the legal framework on environmental protection. Zimbabwe is a part of various conventions, treaties and agreements that aim to protect the environment. It is a party to the Convention on Biological Diversity and Ramsar Convention which are relevant in the oil and gas exploration.  Due to climate change, it is without a doubt that oil and gas extraction must be done in accordance with the global environmental goals, which include among others – the goal to reduce greenhouse gas emissions. This is in line with the United Nations Framework Convention on Climate Change (UNFCCC) and the Kyoto Protocol among other conventions which aim at combating climate change. As a country’s environmental standards will not always be able to keep up to date with the latest, international developments, it is often the case that Oil Agreements will impose a general obligation, on private parties to not only undertake their obligations in compliance with the country’s environmental laws, but also in compliance with international best practices. These may include, the IFC Performance Standards on Environmental and Social Sustainability; the World Bank Group (WBG) Environmental, Health, and Safety (EHS) Guidelines; and the Equator Principles, among others.

The environmental protection and rights are enshrined in Section 73 of the Constitution of Zimbabwe. In addition, the Minister of Environment has powers to make environmental protection measures which are equally applicable to mineral oil and natural gas exploration, extraction, and development activities. Section 73 of the EMA Act prohibits the discharge of oil or a mixture containing oil into any waters or any other or any parts of the environment. While this provision might be widely used relating to those who deal with oil from a trading perspective, it is relevant to oil extraction as it demands cautiousness in its handling.

ZELA recommends that the ongoing legislative agenda includes continuation of proposed reforms to the Environmental Management Act through strengthening provisions of the  existing draft Environmental Management Amendment Bill (EMAB) that was under consideration by the last Parliament as follows:

• The EMAB should include more principles on specific issues under the clauses on guiding principles especially focusing on climate change, waste, biodiversity and fisheries. The ongoing oil exploration is in Cabora Bassa and Zambezi River basin which supports considerable and important biodiversity, not just in Zimbabwe.
• The Environmental Management Act should therefore ensure its provisions relating to access to information amongst other things become applicable even to private sector entities, like Invictus and other juristic persons.
• There is need to promote Environmental and Social Impact Assessments and encourage the participation of interested and affected parties, including communities in the ESIA processes by establishing a mechanism to periodically inform all concerned parties about the results of monitoring ESIAs including recommended remedial measures and appeals against ESIA approval processes. On participation specific reference should also be made to women, persons with disabilities and the youth.
• Public documents such Environmental Action Plans and ESIAs should also be simplified and published in local languages and disseminated.
• The EMAB does not provide for the protection of whistle-blowers. By strengthening provisions on Whistle-blower protection, environmental human rights defenders can help complement government efforts in enforcing compliance with environmental laws.
• The EMAB has no provision for Environmental Courts. Specialized environmental courts would significantly contribute to environmental protection and enforcement of laws to address environmental, safety and health problems associated with the exploration and extraction of oil and gas.
• Although the current Environmental Management Act provides for the procedures for the environmental implementation plans and environmental plans in terms of Section 96, there are no provisions on the compliance or non-compliance of these plans. Moreover, the Act does not promote ESIAs in a transboundary context.
• The ESIAs are supposed to be carried out in a transboundary context in accordance with the customary international law obligation that arises from Principle or Obligation 21/2 of the Stockholm and Rio Declarations respectively.

4.     Concluding remarks and prelude to the next piece

ZELA will continue working with Parliament to strengthen legislative and oversight functions of parliament in environmental protection and natural resources management. In the next newsletter we will provide further insights on how the MMAB can be further strengthened in areas of economic benefits and local content aspects like skills and technology transfer, among others.

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[1] Mines and Minerals Act [Chapter 24:05]

[2] Mines Act s. 301 (1)

[3] Mines Act s. 301 (2)

[4] Mines Act s. 302

[5] Mines Act s. 303

[6] Mines Act s. 304

[7] Mines Act s. 305

[8] Mineral and Petroleum Resources Development Act 28 of 2002 ss. 70, 71 and 72

[9] Mineral and Petroleum Resources Development Act 28 of 2002 s 71(e)

[10] Petroleum Act [Chapter 13:22] ss. 3 & 4