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Acquisition of petroleum exploration rights in Zambia – August 2014

Acquisition of petroleum exploration rights in Zambia – August 2014

The Petroleum (Exploration and Production) Act, 2008 (the โ€œPetroleum Actโ€) provides that all property and control over petroleum and accompanying substances, in whatever physical state, located inย Zambiaย is vested in the President on behalf of the State.

In order to acquireย 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 โ€œMinisterโ€) in two newspapers of general circulation inย Zambiaย inviting bids for the grant ofย petroleum exploration licencesย 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.

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

Where a bid is successful, theย Petroleum Actย gives the successful bidder the discretion to apply to the Minister for a petroleum exploration license (the โ€œLicenceโ€) 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 โ€œCommitteeโ€).

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.

Published 1 August 2014

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