The proposed revision to the Petroleum Law stipulates that one-quarter of the liquefied natural gas (LNG) produced in Mozambique will be made available on the domestic market for domestic consumption, adding that the government intends to “fully” utilize the revenues generated by these operations.
“The government wants to establish that an oil development plan must include a minimum quota of 25% of oil and gas, including in the form of produced LNG, to be allocated to the domestic market, exclusively for domestic consumption,” clarifies the proposal, which will be debated this Thursday, May 7, in Parliament.
According to Lusa, in its rationale, the Executive acknowledges that after ten years of implementing the current legislation, and despite the progress made in attracting investment—which has led to the development of significant oil projects—gaps remain that require strengthening the state’s sovereignty over resources and its capacity to fully capture revenues from oil operations.
“It is urgent to maximize energy resources as drivers of economic development, industrialization, and the creation of value chains for Mozambicans, also in the context of the challenges facing the sector in the global energy transition,” the government explains.
Under the new legal provision, to ensure a new framework that safeguards the State’s strategic interests, a binding agreement will be established between the operator of oil and gas operations and the holder of pre-existing rights or the affected local community in the project’s development area, including the obligation to submit a periodic report on human rights compliance.
In the implementation of oil operations, the legislative revision aims to “ensure greater gains for the State through regulatory measures, ranging from the inclusion of an obligation regarding the flaring of natural gas to the obligation for concessionaires who do not develop projects in areas for extended periods to pay fees.”
The amendments also aim to boost industrialization through the allocation of LNG at competitive prices in the domestic market, the obligation to allocate 100% of condensate to the domestic market, as well as “a mandatory minimum percentage of Participating Interest for the State’s exclusive representative and the obligation for ‘free carry’ financing until the start of commercial production,” thereby reducing the effort and exposure to financial risks in oil operations.
The proposal also highlights “the strengthening of the role of the National Petroleum Institute (INP) by granting it the status of a Regulatory Authority, with powers to impose sanctions and conduct inspections, as well as greater control over recoverable costs.”
It also “establishes a hybrid regime regarding ‘force majeure’ [which allows, in the event of certain occurrences, for the suspension of an agreed-upon project], with predictable timelines and a safeguard against the State being held liable for costs.”
Mozambique has three approved development projects for the exploration of natural gas reserves in the Rovuma Basin, ranked among the largest in the world, off the coast of Cabo Delgado.
Eni’s Coral Sul project is the only one in operation since 2022; last October, an investment in a second floating extraction platform, named Coral Norte, was approved, representing a $7.2 billion investment that, starting in 2028, will allow production to double to 7 million metric tons per year (mtpa) of LNG.
After a four-year suspension due to terrorist attacks in Cabo Delgado, the $20 billion Mozambique LNG (Area 1) project, operated by TotalEnergies, officially resumed in January and is projected to reach up to 13 mtpa starting in 2029.
There is also the $30 billion Rovuma LNG (Area 4) project, operated by ExxonMobil, with 18 mtpa projected after 2030, and for which a final investment decision is expected this year.
