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Acquisition of petroleum exploration rights in Zambia

Acquisition of petroleum exploration rights in Zambia

The Petroleum (Exploration and Production) Act, 2008 (the “Petroleum Act”) provides that all property and control over petroleum and accompanying substances, in whatever physical state, located in Zambia is vested in the President on behalf of the State.

In order to acquire exploration rights, a person qualified to hold exploration rights prescribed by the Petroleum Act is required to respond to a Gazette notice issued by the Minister of Mines, Energy and Water Development (the “Minister”) in two newspapers of general circulation in Zambia inviting bids for the grant of petroleum exploration licences in respect of any block or blocks specified in such notice. 

In order for a person to be considered qualified, they should not be:

  1. under the age of eighteen;
  2. bankrupt; and
  3. convicted of fraud or dishonesty within the previous ten years in Zambia or outside Zambia.

In relation to companies, the applicant company should not:

  1. be without an established office in Zambia (i.e. registered in Zambia);
  2. be in liquidation; and
  3. have among its shareholders or directors a disqualified person.
Acquisition of petroleum exploration rights in Zambia
Charles Mkokweza is a partner and Head of the Banking & Finance team at Zambian LEX Africa member, Corpus Legal Practitioners.

Where bids are submitted in the prescribed form, the Petroleum (Exploration and Production) (General) Regulations, 2011 (the “Regulations”) require the Minister to cause an evaluation of the bids by the Petroleum Technical Committee (the “Technical Committee”) within thirty (30) days of receiving the bids.

Where a bid is successful, the Petroleum Act gives the successful bidder the discretion to apply to the Minister for a petroleum exploration license (the “Licence”) in the prescribed form and upon payment of the prescribed fee.

Upon submission of an application, the Technical Committee would subsequently recommend the grant or refusal to grant a Licence to a bidder to the Petroleum Committee (the “Committee”).

The Regulations provide that, where the Committee has approved an application, the Minister is under an obligation to grant the licence within a period of seven (7) days.

In the event that a licence is granted, the Petroleum Act provides that the Minister shall issue it in a prescribed form with the following information:

  1. terms and conditions on which it is granted;
  2. identity of the block to which the licence relates;
  3. description of the exploration area; and
  4. date and period for which it is granted.

Petroleum exploration licences are granted for a period of four years and may be renewed on expiry for two further periods not exceeding three years each.

A holder of petroleum is granted exclusive rights to explore for petroleum in the area subject to the licence and carry on such operations and exclusive works as are necessary for that purpose.

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