Offshore, Onstream

Offshore, Onstream

Although the government has actively participated in the progress of the energy sector, Mozambique is now facing the challenge of providing a legal and institutional framework. It must balance the protection of the project investors and operators which will conduct these extremely high magnitude campaigns with maximizing the benefits for the local population.

Negotiations between the most important operators in the energy sector such as Anadarko or Ente Nazionale Idrocarburi (ENI) and the government resulted in the passing of the Enabling Law No 25/2014 of September 23rd 2014, which replaced the obsolete Petroleum Law of 2001. The new law is a large leap towards the modernization of the legal framework, but it is still insufficient when it comes to the Liquefied Natural Gas legal structure. The newly discovered LNG reserves in Mozambique’s offshore are one of the world’s largest natural discoveries in the past decade (Anadarko’s studies suggest that there are enough reserves to support the development of 50 million tons per annum, which would make Mozambique the world’s third largest LNG exporter) and it is ought to become one of the drivers of Mozambique’s economy in the near future. The scale of the operation might turn Mozambique in one of the frontline energy exporters not only in Africa but in the world, but the legal and institutional framework was insufficient.

The recently passed law No 25/2014 authorizes the Council of Ministers to legislate a special regime for the LNG project, Decree law that is expected to be approved by Mozambique’s Parliament by the end of 2015. Although the new Petroleum Law still doesn’t offer the necessary security of other international modern legislations, as it leaves a certain level of uncertainty and in some cases, contradictory legislation, the Decree Law for the Rovuma Basin LNG Project is practical and constructive, as it allows the participants to negotiate special conditions and requisites for the new project.

As a result, the uncertainty created in the Petroleum Law has therefore been eased, giving the LNG market a stability and clarity—essential for PPPs. It will provide Mozambique a solid tool, which will be undoubtedly crucial in order to face the upcoming challenges of the energy sector.