Madagascar auctioning a large swath of virgin waters for oil exploration

At an oil industry event in Houston in September, representatives of Madagascar’s government went into auctioneer mode. Their message: “Let the bidding commence!”

They had traveled to Texas to announce that Madagascar was opening up a large area of marine territory to oil exploration. None of the 44 concessions on offer, which cover 63,296 square kilometers (24,440 square miles) in the Mozambique Channel off the country’s west coast, has ever been tendered or explored before.

Members of the hydrocarbon industry expressed excitement about the news, but civil society groups oppose the sale, arguing that the potential projects’ environmental and social impacts have not been evaluated. The coastal waters have a high level of biodiversity, a fragile coral reef network, and a number of marine areas that local fishers manage themselves, all of which could be threatened by oil exploration or drilling.

“[T]he offshore exploration and production of oil and gas on this scale goes directly against the objectives of protecting fisheries resources and preserving the marine ecosystems on which the livelihoods and food security of a large part of the Malagasy population depend,” wrote four civil society groups, led by the Antananarivo-based Research and Support Center for Development Alternatives–Indian Ocean (CRAAD-OI), in a statement late last month.

International groups have also voiced opposition to the sell-off. “The opening of this bidding round is clearly worrying for Madagascar’s unique marine ecosystems and biodiversity,” François Chartier, an oceans campaigner for Greenpeace France, told Mongabay by email. “Oil drilling could threaten vulnerable species, coral reefs and the coastal environment, including mangroves. An oil spill in this region would be a catastrophe for one of the most biodiverse areas in the world.”

Awash with potential

There have been no major oil discoveries in Madagascar to date, and only two projects, both onshore “heavy oil” operations in the country’s west, have even neared commercial production. However, the oil industry regards Madagascar as underexplored and potentially valuable. “The Madagascar bidding round offers a level of excitement that we have never experienced before at the Oil Week,” Paul Sinclair, director of the Africa Oil Week conference held in South Africa last month, told a trade publication.

Oil and gas prospectors are interested in the newly offered concessions, which sit in the Morondava Basin, because of their proximity to Mozambique, where vast offshore natural gas reserves were discovered in 2010. A recent geological survey of the basin, subtitled “A Bright Future Awaits,” concludes that it could be a “future petroleum producing province of some note.”

In February, Madagascar’s representatives will attend industry roadshows in Houston and London to further promote the territory on offer. The period in which oil companies can put in their bids, called a licensing round, will last through May 2019.

Per industry norms, any deals would likely take the form of “production sharing contracts” in which a company shares a certain percentage of profits with the government if and when its project reaches commercial production. A sample of such a contract has been posted online by the Office of National Mines and Strategic Industries (OMNIS), the state agency that initiated this licensing round and manages Madagascar’s oil and gas sector.

Concerned conservationists

Conservationists argue that even the exploration phase of an oil project can damage the local environment. In 2008, ExxonMobil’s exploration work in northern Madagascar was linked to the stranding of 100 melon-headed whales (Peponocephala electra) in a lagoon system. Seventy-five of the whales, which normally don’t enter such shallow waters, died. They were likely sent off track by an echosounder system operated by an ExxonMobil survey vessel, according to a scientific review by the International Whaling Commission. Echosounding was previously thought to be one of the industry’s more innocuous exploration techniques, and ExxonMobil did not accept the review’s conclusion. The company stopped exploration work in Madagascar in 2015, reportedly due to disappointing findings.

The 44 blocks on offer join three large areas already under contract in the region. Four of the 44 blocks already appear to be “under negotiation,” a sign that at least one oil company has acted quickly.

Some of the 44 blocks overlap with a marine protected area (MPA), territory marked for potential future MPAs, or areasmanaged by local fishing communities. A notable overlap is with an existing MPA that encompasses the Barren Isles, a set of small islands home to migrant fishers who work out of dugout canoes or sailing pirogues.

Hydrocarbon projects could jeopardize Madagascar’s goal to triple the area of its MPAs, observers say. In 2014, then-President Hery Rajaonarimampianina committed to that goal at a conference in Australia, and conservationists in Madagascar still cite his “promise of Sydney.”

An OMNIS representative disputed the idea that the agency’s sell-off would affect marine protected areas. “Most of the 44 oil blocks offered during this licensing round are generally located offshore with a water depth of approximately 2700 to 3000 [meters, or 8,900 to 9,800 feet] on average whereas our marine protected areas are in general situated in the littoral zone along the coast,” Olivier Belalahy, OMNIS’s director of hydrocarbons, told Mongabay by email.

OMNIS explained its approach in a letter dated Dec. 5 to civil society groups that had expressed opposition to the sale. It said the sell-off of concessions had been planned since 2011 but delayed several times, to the detriment of the national economy. “The suspension of the promotional campaigns that should have happened regularly has caused Madagascar to miss several opportunities, unlike our neighbors of East Africa that knew how to seize them and where the major oil companies have rushed to because of the potential of this region,” the letter states.

OMNIS also pointed out that it was not legally obligated to conduct environmental impact assessments at this stage, because the oil companies would be required to do so before starting activities in Madagascar. However, this has not allayed the conservationists’ fears. “It’s unclear if Madagascar’s government has the ability to properly assess any environmental impact assessments that the oil companies will put forth,” said Greenpeace’s Chartier.

Madagascar’s fisheries ministry told Mongabay that it did not have any information about the concessions that OMNIS had placed on offer.

Demanding a new code

Civil society groups argue that Madagascar’s petroleum code must be revised before any further oil concessions are sold. The current code, which dates to 1996, does not guarantee that a sufficient percentage of the revenues will go to the state, and it does not include adequate environmental protections, according to the groups. Although the government has opened formal discussions on the oil laws several times since 2008, it has never finalized a new code.

“The adoption of a new oil code that would ensure more revenues for the State has long been a pre-condition for granting concessions,” Frédéric Lesné, head of advocacy at Transparency International–Initiative Madagascar, wrote to Mongabay in an email. “We believe this new code is still very much necessary, as is a broad consultation with all stakeholders before making decisions that will take the country on a specific path of resource exploitation.”

Madagascar’s next government will have a large influence over the way oil exploration is handled. The final round of the country’s presidential election, a run-off between two former presidents, will be held on Dec. 19. The favorite, Andry Rajoelina, proved amenable to the interests of foreign oil companies during his last stint in power.

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