Mozambique has been at the forefront of the East Africa oil and gas boom with its reportedly huge reserves of gas. Some estimates place Mozambique as holding the fourth largest gas reserves in the world after Russia, Iran and Qatar.

In 2013, Mozambique continued to feed international interest in its petroleum sector with additional discoveries of reserves, multi-billion dollar transactions and major changes in line for the fiscal and regulatory environment.

Anadarko and Eni, respectively operators of Area 1 and Area 4, offshore Mozambique, separately announced additional gas discoveries in 2013. With an estimated 170 tcf of gas reserves in the two Areas, it has been publicly reported that:

  • discussions between the operators continue in relation to upstream unitisation of gas deposits straddling their concession areas;
  • further progress is being made towards a joint onshore liquefaction facility with the announcement of co-operation on a feasibility study and joint development of proposed midstream liquefaction facilities;
  • discussions have focused on LNG facilities set out in 5 development stages, each stage having 2 LNG trains of about 5 million tonnes per year; and
  • the first such stage is planned for completion in 2018/2019.

This past year also saw significant transactions from leading Asian energy companies in both Area 1 and Area 4 as China National Petroleum Corporation (CNPC) and India’s Oil and Natural Gas Corporation (ONGC) completed multi-billion dollar investments that saw them each with a 20% interest in Area 4 and Area 1 respectively.

Even with large gas discoveries significant oil finds appear to remain elusive in Mozambique. In September 2013, Statoil and Tullow announced that their exploration well in Area 2 of the Rovuma basin, offshore Mozambique which was specifically aimed at potential crude oil deposits did not encounter any hydrocarbons and was plugged and abandoned.

Tax issues

On the fiscal front, in 2013 the Government introduced new capital gains tax rules. Under the previous tax rules the rate of capital gains tax payable on sale of Mozambican natural resource assets declined progressively the longer the underlying asset was held such that, after five years, the effective tax rate was 9.6% on the gains made from the sales of such assets. Further, the previous capital tax rules generally did not apply to the sale of shares in a foreign company holding such assets in Mozambique.

Under the new capital gains tax rules (effective from 1 January 2014), the capital gains tax rate is 32% with no reduction for the length of the holding period of the asset and applies to offshore sales of shares of a company which involve an underlying asset based in Mozambique.

There has also been suggestions from the Government for a new ‘petroleum tax’ to be introduced as early as 2015. At this stage, this remains as a discussion point only, with no concrete developments, and it is unclear what form (if any) such a new tax might take.

Other legislative changes

On the regulatory front, in April 2013 the long anticipated new Petroleum Bill was approved by the Government and submitted to parliament for approval. The details of the bill are not public but it is anticipated that the legislative changes include:

  • additional regulation on natural gas and coal bed methane in recognition of Mozambique’s large gas reserves;
  • clearer requirements on third party access to energy infrastructure;
  • clarifying the requirement for Government consent to indirect transfers of participating interests to petroleum Exploration and Production Concession Contracts;
  • strict liability of the Operator being extended to all third party damage arising from petroleum operations (and not just environmental damage);
  • environmental requirements;
  • new and more detailed provisions of the Government’s right to requisition petroleum in the national interest; and
  • more detailed provisions in respect of the awarding of concessions through the bidding process.

We understand that the new Petroleum Bill is currently in the 5thCommittee Stage (technical commission) and it is possible that it may be tabled before the full parliament sometime in the 3rd quarter of 2014. However, a general election is also due to be held in October 2014 (Presidential, parliamentary and regional assembly elections) and that is likely to disrupt the legislative calendar even further.

The delays in passing the new Petroleum Bill is also likely to result in further delays to the much anticipated Fifth Licencing Round for 12 new exploration blocks onshore and offshore Mozambique as the new Petroleum Bill is anticipated to include new regulations on the awarding of concessions through the bidding process.


Mozambique continues to attract much international attention given the enormous size of the discoveries to date. International investors will continue to eagerly watch how the Government and industry participants manage the next stage in the development of its petroleum industry, develop the reserves and bring them to market. It remains to be seen if the elections and any resulting changes to the Government will impact the direction or pace of legislative change in the oil and gas sector.