Mozambique Offers New Oil & Gas Terms

Amended law opens way for fresh bidding rounds; legislation requires partnership with state oil firm ENH. LNG processing projects to operate under special regime and Mozambique chasing 2018 target for first LNG export.

Mozambique's parliament has passed an amended petroleum law that will allow the government to issue new gas and oil exploration licences but it also requires investors to partner with the state oil firm, the mineral resources minister said on Friday.

The revised law will come into effect by the end of the year and bidding rounds for concessions would be held in the coming months, oil sector officials said.

U.S. oil major Anadarko Petroleum Corp and Italy's Eni are developing multi-billion-dollar liquified natural gas (LNG) export projects in Mozambique's northern offshore Rovuma basin. Smaller companies are also exploring.

Under the new legislation, foreign operators who win licences to explore for oil and gas must do so in partnership with state oil company ENH. The law also says that 25 percent of all LNG produced should go to the domestic market.

The southern African state, which still bears the scars of a devastating 1975-1992 civil war, is hoping revenues from its large natural gas deposits and its fledgling coal mining and export industry, will help it emerge from years of poverty and dependence on foreign donors.

Minister of Mineral Resources Esperanca Bias said the previous 2001 hydrocarbons legislation had needed to be updated to reflect developments in the sector.

"We said there would be no new deals until the law was amended," she told Reuters.

The revised law also stipulates that in-country oil and gas firms have to be listed on the nascent Maputo stock exchange.

Arsenio Mabote, President of the National Petroleum Institute, said interest from potential investors in Mozambican offshore acreage was "very high" but did not give details of companies that had shown interest.

Around 180 trillion cubic feet of gas has been found in the Rovuma Basin, according to the institute. This would be enough to supply Germany, Britain, France and Italy for 18 years.

"SPECIAL REGIME" FOR LNG PROCESSING

The legislation approved by parliament also included authorisation for the government to create "a special regime" for the LNG processing chain in Rovuma Basin Areas 1 and 4 where Anadarko and Eni are operating. This included the construction and operation of LNG facilities and related activities.

Bias said the idea of the special legal regime was to be able to "grant certain exemptions in the legislation and establishment of contractual accords for the Rovuma Basin projects", but she did not spell out details.

Mozambique has recently set up a public company, Portos de Cabo Delgado, bringing together the state rail operator, CFM, and the national oil company to develop the strategic onshore infrastructure in the north required for LNG exports.

The state venture was seeking partners to expand the northern ports of Pemba and Palma for the LNG industry.

The International Monetary Fund, which sees Mozambique's economy growing 8 percent annually in the medium term - one of the highest rates in Africa - has said the country can expect "substantial revenues" from LNG by 2022.

But it says Mozambique faces risks from climate disasters, commodity price shocks and variations in global demand for its coal and gas, as well as "financing risks for megaprojects".

Industry analysts say Mozambique needs to develop its LNG potential by the end of this decade as other supplies come on the market from West and East Africa and the global supply/demand scenario shifts, with the United States moving from energy importer to exporter.

Some experts say it may struggle to meet its official target date of 2018 for the start of LNG exports.

By Manuel Mucari