All systems on go for Mozambique LNG

This was expected and is in line with practice in many other oil and gas producing nations, although the government must be careful to ensure that the company can build up its skills base sufficiently to fulfil this role. However, the new law also includes a domestic market obligation that requires 25% of all hydrocarbons produced to be marketed within Mozambique.

This stipulation is designed to encourage the development of industrial capacity within the country, including in the form of gas-fired power generation, fertiliser manufacture and cement production.

However, the financial arrangements surrounding the LNG scheme will be subject to an unspecified ‘special regime’, including some ‘exemptions’. This effectively weakens the new legislation, although it would be very difficult to find a local market for a quarter of all gas production in the Rovuma Basin.

Oil and gas companies operating in the country are also expected to seek a listing on the Maputo stock exchange. Following the passage of the new legislation, a new licensing round for the rights to explore more blocks is expected to be launched later this year or early in 2015.

Peace deal
Foreign investors will welcome the signing of a peace agreement between the government and rebel group Renamo in late August. The two sides had contested the country’s long civil war from independence until the 1992 peace accord. Since then, Renamo had operated as a political rather than military force, although it had lost every national election over the intervening 22 years by a wide margin.

However, it took up arms again last year, attacking road and rail transport arteries in remote areas, and also people. The timing of the renewed conflict may have been linked to the upturn in Mozambique’s economic fortunes, in the form of the twin coal and natural gas booms.
The new agreement grants an amnesty to those involved in these attacks and could pave the way for peaceful political campaigning in the run-up to the next presidential and legislative elections on 15th October.

Renamo negotiator Saimone Macuiane said: “The declaration of the cessation of military hostilities which we’ve just signed is made in the spirit of good faith and represents the will of all of Mozambique’s people to establish peace and harmony in our country.”

The ruling Frelimo party is almost certain to win the elections but the big question is whether the new Democratic Movement of Mozambique will eclipse Renamo as the main opposition party. Whatever the outcome, the oil and gas industry needs political stability in order to secure finance for the planned projects.