11 August 2014

Mozambique: Assembly Passes Petroleum Bill

Maputo — The Mozambican parliament, the Assembly of the Republic, on Monday passed the first reading of a bill amending the country's law on petroleum and gas, intended, according to the government, “to make the legal framework more predictable and transparent for investors”.

The government bill seeks to convert matters that had previously been in contracts signed between the government and hydrocarbon companies into rights and obligations regulated by law.

The bill reiterates that all petroleum and gas resources are state property, and the state has the right to participate in all hydrocarbon operations at any phase. All data obtained under any of the concessions contracts envisaged by the law also become state property.

Petroleum and gas operations must be undertaken through a concession contract that may result from a public tender, or negotiations between the company and the government.

Introducing the bill, the Minister of Mineral Resources, Esperanca Bias, stressed that it is obligatory to publish all concession contracts.

Contracts signed by the companies to obtain goods and services above a minimum value must be preceded by a public tender, and the companies must give preference to local products and services when these are comparable in quality to imported goods and services, are available in due time, and are no more than 10 per cent more expensive.

Companies exploring for hydrocarbons must report any discovery in their concession area to the government within 24 hours. In the case of a commercial discovery, the company must submit to the government a plan to develop the deposit.

The bill states that a percentage of the revenue generated in hydrocarbon production must be channelled to the development of communities in the areas where these operations take place. The exact percentage will be fixed in the state budget each year, depending on the revenue envisaged from petroleum and gas.

Petroleum and gas companies must ensure that their operations cause no environmental damage as far as possible, and must take environmental measures that are in line with internationally accepted standards.

In particular, the companies must avoid oil spills or leaks, and if these do happen they are responsible for the subsequent clean-up operations, and must report to the government the amount of oil spilled. The companies must also pay compensation for any pollution or other damage caused.

In its written opinion on the bill, the Assembly's Commission on Agriculture, Economic Affairs and the Environment proposed amendments to the bill notably that some goods and services, to be defined in a specific regulation, should be provided exclusively by Mozambican nationals.

The commission stressed that some of the petroleum and gas produced must be directed to the development of the national economy and the industrialization of the country, and suggested that this should be at least 25 per cent of what was produced.

When people need to be resettled because of petroleum and gas operations, the commission called for “fair compensation” to be agreed in a memorandum of understanding between the company and the households and communities concerned, signed under the auspices of the government. Such a memorandum should be an indispensable condition for starting the exploitation of hydrocarbons.

Bias said the government accepts the thrust of the Commission's amendments, which will now be incorporated into the final version of the bill.

The first reading of the bill passed by 175 votes to 23. All deputies from the ruling Frelimo Party and from the Mozambique Democratic Movement (MDM) present voted in favour, while the 23 deputies of the former rebel movement Renamo voted against.

Renamo justified its vote on the grounds that the bill contains no mention of the High Authority on the Extractive Industry. This is a body that does not yet exist, but will be set up under a Mining Law passed last month.

Renamo objects to the fact that the High Authority as envisaged in the Mining Law will be set up by the government. It demands that the Assembly should elect members of the High Authority - which is just a way of ensuring that there will be some Renamo members on the new body, since “election” by the Assembly always means that the Frelimo parliamentary group appoints the majority of those being “elected” and Renamo appoints the minority.

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