The Mozambique New Petroleum Law (21/2014) came into force on 18 August 2014 and is subject to further regulation by the government within 60 days of its publication. The law provides that all petroleum resources existing as natural resources in the soil and the subsoil, in interior waters, in the territorial sea, on the continental shelf and in the exclusive economic zone are the property of the State.
Petroleum operations are carried out through concession contracts which are awarded, as a rule, by public tender and by “simultaneous or direct negotiation” and grant the concessionaire one or more of the following rights:
- reconnaissance (reconhecimento);
- prospecting and research (prospecção e pesquisa);
- construction and operation of oil or gas pipeline systems (construção e operação de sistemas de oleoduto ou gasaduto);
- construction and operation of infrastructures (construção e operação de infra-estruturas).
Any Mozambican legal person or foreign legal entity registered in Mozambique with the necessary technical and financial capacity to effectively carry out the operations may hold the right to carry out petroleum operations. Mozambican legal entities and foreign legal entities associated with Mozambican legal entities have preferential rights to the granting of concession contracts. To qualify as a Mozambican legal entity, more than 50% of a company’s share capital must be held by a Mozambican legal entity and the entity must be incorporated in Mozambique and be listed on the Mozambican Stock Exchange.
The State reserves the right to participate (through the national oil company Empresa Nacional de Hidrocarbonetos de Moçambique, E.P.) in petroleum operations in which any legal entity is involved. Such participation may occur during any phase of the petroleum operation in accordance with the terms to be agreed in a contract between the State and the entities carrying out the petroleum operations.
Transfer of rights
Any direct or indirect transfer of rights and obligations conferred in terms of a concession contract to an affiliate or to a third party takes place in accordance with local laws and is subject to government approval. This requirement is also applicable to other direct and indirect transfer of participation interests in concession contracts including the transfer of shares or other forms of shareholdings which determine control of the entity holding rights in terms of a concession contract.
A financial performance guarantee must be provided in terms yet to be established by regulation.
The law caters for local content and requires foreign suppliers of services to petroleum operations to have local partners. Further, concessionaires must give preference to local goods and services which are of internationally comparable quality, are available at the required time and in sufficient quantities and when the price, including taxes, is not more than 10% above the price of the available imported goods.
The law provides that at least 25% of oil and gas extracted in Mozambique be reserved for the domestic market.
A percentage of the revenue generated by the petroleum activities is to be channelled in the State budget towards the development of the communities of the areas where the oil and gas enterprises are located.
Unitisation of shared petroleum deposits
The law provides that a petroleum deposit which is partly located in one contract area and partly in another contract area must be jointly developed and operated pursuant to a unitisation agreement, which will be subject to approval by the government.
Any disputes will be resolved, if possible, by negotiation. If the dispute cannot be solved by negotiation, the parties will, if the contract provides for arbitration, proceed to arbitration under the auspices of the Centre for Settlement of Investment Disputes (ICSID). If the contract is silent, the dispute will be referred to the Mozambican judicial courts.
The Law provides a transitional provision which states that rights acquired under existing contracts (including concession contracts) executed under the revoked 2001 Petroleum Activities Law are maintained. After the expiry of the term, new contracts and concessions must be concluded in terms of the new law.