Hold a Flame

How would you characterize the regulatory framework for upstream oil and gas in Mozambique?

I think the regulatory framework for petroleum in general, which also includes gas, is evolving in the best way possible. We have adopted an approach whereby, over time, we look at the regulatory framework and try to see if it matches reality. As a matter of fact, we are currently in the processes of revising the legal and regulatory framework, and are awaiting parliamentary approval of the latest draft. We are doing this essentially because we want to fine-tune the gaps and legally cater to potential new developments, such as LNG projects or shale gas exploration—we are not currently involved in those aspects of the sector. In addition to that, we have decided that from now on all contracts for oil and gas exploration will be made public. We are effectively streamlining petroleum legislation to ensure compliance with the requirements of the sector.

How important is it to ensure transparency in the management of Mozambique’s petroleum resources?

The reason why we have had success thus far is because we inspire confidence in the investor community. Investors know that we play clean in terms of how they acquire acreage for exploration, and how they become involved in Mozambique. The processes are transparent. We have much to improve, but the contracts contain anti-corruption clauses. We are part of the Extractive Industries Transparency Initiative (EITI), and the government is taking numerous measures to guarantee the effective management of the sector.

What changes can we expect to see in the new petroleum law?

Usually, whatever documents we draft for the petroleum sector, such as laws and regulations, we make sure that we share the content with the stakeholders. In principle, we try to attract investors through whatever we undertake. Therefore, the legal framework has to satisfy the stakeholders and investors that come to Mozambique, and who play a valuable role here. We run workshops and hold consultations, deliver them the final draft, and seek to accommodate their wishes. In general, we listen to stakeholders because, at the end of the day, we are keen to attract investment to the country.

Why is the LNG plant a crucial development and what is its status?

It is crucial because we have to fund deep offshore reserves, which are very costly to develop. We believe that the only way to make sure we extract enough is to have an anchor project, such as LNG, to take advantage of the market. Then, we can take the anchor project and start to develop local projects such as power generation. And while we are looking at LNG exports, that doesn’t mean we don’t give priority to the local market; it is a priority for us because we are about adding value to Mozambique itself. However, in order to develop the high-cost reserves that require a wide range of expensive technology, we need to devise an anchor project. That project is basically about producing LNG to supply the entire market and inject value into the country. We have received many proposals from international investors keen to develop projects that we see as very beneficial in terms of generating employment, and improving both infrastructure and the capacity of local labor and content. We would like to see our national or private companies developing strategic partnerships with foreign companies to supply services, meaning that in 10 or 20 years we are able undertake this activity on our own.

How would you characterize the government’s efforts to ensure that investments in the petroleum sector translate into maximum benefits for Mozambicans?

Although we don’t have policies in place, such as for local content, we have to encourage companies to commit themselves to the country, taking into consideration its needs in terms of economic development. We are moving in the right direction. And, meanwhile, we certainly don’t intend to rush through legislation for local content or corporate social responsibility (CSR), but rather introduce the right legal framework that both satisfies the investor community and ensures that Mozambique takes the greatest possible advantage of its circumstances for the future.

© The Business Year – May 2014