In the early 1990’s, liquid fuel importation was in the hands of the private sector. Oil imports were facilitated on behalf of the Oil Marketing Companies (OMCs) through an Industry Petroleum Supply Unit (IPSU).
The floatation of the Malawi Kwacha in 1994 resulted in heavy exchange losses for the oil industry and consequently, IPSU handed over fuel importation to Government, which directed that Petroleum Control Commission (PCC), established by an Act of Parliament, should combine both regulation and importation of liquid fuel into the country.
In 1999, PCC stopped importation of fuel because of concerns raised by multilateral partners on governance issues such as combining the role of a regulator and importer of fuel for the country. The role of importation reverted to the private sector through Petroleum Importers Limited (PIL), a consortium of oil marketing companies.
However, the oil companies do not have adequate storage capacity and do not seem to have the incentive to invest significantly in this area. The arrangement does not therefore provide for strategic fuel reserves to last for a reasonably longer period, leaving the country very vulnerable to supply chain shocks.
In 2003, the Government of Malawi, with financial support from the World Bank and United Nations Development Programme (UNDP), developed the National Energy Policy for Malawi. The Energy Policy identified various challenges faced by the oil industry in Malawi. These included unreliability of supplies, lack of competition in the oil industry and absence of proper institutional arrangements to champion upstream activities in oil and gas for the country. The policy therefore recommended the establishment of a national oil company through an Act of Parliament.