Mozambique Faces a Wait for Gas Royalties on Costs, Group Says
Mozambique, site of the world’s largest gas discoveries in the past decade, will receive most of its royalties after explorers recover their costs, according to the Center for Public Integrity.
“The government will receive its portion of the overall revenue far down the production timeline,” the Maputo-based organization said in a report, citing contracts it obtained. Eni SpA (ENI), Anadarko Petroleum Corp. (APC), Statoil ASA (STL) and Petroliam Nasional Bhd. are among the companies that got exploration and production contracts in the country’s offshore Rovuma Basin.
Eni has discovered 75 trillion cubic feet of gas in Area 4’s offshore fields, more than Norway’s current reserves.
“There is one crucial element yet to be negotiated: the price of gas,” Adriano Nuvunga, the editor of the report, said in an e-mailed response to questions. “The contracts may suggest a goal deal for Mozambique but the price of gas may put the entire Mozambique take into jeopardy if poorly negotiated.”
The southern African nation’s royalty rates depend on how deep the companies have to go to extract the gas. As all the gas finds are in waters deeper than 500 meters (1,640 feet), only the lowest of these potential rates is relevant, according to the organization. Anadarko, Eni and Statoil concession rates are 2 percent, while Petronas is paying 6 percent, it said.
The price of the fuel before entering a liquefied natural gas plant for export will probably be determined by taking the price in a long-term sales agreement and reducing by cost of production and transport, according to the report.
“The discovery of liquefied natural gas is a transformational opportunity for the future of Mozambique, where 52 percent of the population is under 18,” Lisa Kurbiel, as senior social policy specialist at the United Nations Children’s Fund, said by e-mail from Maputo.
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