Mozambique Revising Petroleum Law to Include Gas, Bias Says

Mozambique, home along with Tanzania and Kenya to the biggest natural-gas discoveries in a decade, is reviewing its Petroleum Act to include liquefied natural gas, Resources Minister Esperanca Bias said.

The southern African nation, a former Portuguese colony that started studying changes last year, will hold public discussions to get input, Bias told reporters today in the capital, Maputo.

The country, which is also reworking its mining laws, is one of several resource-rich African nations looking to benefit from higher commodity prices. Eni SpA and Anadarko Petroleum Corp. (APC) found about $800 billion of gas under the Indian Ocean off Mozambique. Vale SA (VALE5), the world’s biggest iron-ore exporter, and Rio Tinto Plc have coal assets there.

“We feel that some companies are not fulfilling their promises on social responsibility,” Bias said.

The mining law proposes future licenses will require that 5 percent to 25 percent of shares in projects be held by locals, and foreign companies must issue public tenders to domestic operators to get goods and services, she said. Vale and Rio Tinto are working with the the government on how they can include local investors as service providers, she said.

Permits will be issued for 10 years if the law is passed, and holders have to start output within 48 months of receiving them, Bias said. Operators stand to lose their licenses if they cause “serious damage” to the environment. she said.

Tax Changes

Mozambique is still in the process of determining changes to the tax rules for mining companies, said Bias.

“We will look at what other countries are charging in the mining sector,” she said. “We also want to get more input from the public on tax regimes,” she said, declining to provide figures.

Vale’s board approved spending $2.07 billion to double output capacity at its Moatize coal mine in Mozambique to 22 million metric tons, starting in the second half of 2014, and to invest $4.44 billion in the Nacala Corridor, a railway and maritime terminal related to the project.

The proposed legislation, which would replace the Mining Law of 2002, still has to go to the Cabinet before lawmakers vote on whether to approve the draft, she said.

Royal Dutch Shell Plc, Europe’s largest oil company, on Feb. 22 said it offered to buy African explorer Cove Energy Plc to gain a foothold in Mozambique. Cove has an 8.5 percent stake in Rovuma Area 1, which holds 15 trillion to 30 trillion cubic feet of recoverable gas, enough to justify production of liquefied natural gas for Asian markets.

To contact the reporter on this story: Fred Katerere in Maputo at fkaterere@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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