Mozambique

The Mozambican Petroleum Law of February 2001 provides for three kinds of concession contracts:
Reconnaissance Contract:
Maximum two years exclusivity.

Exploration and Production Contract:
Exploration period maximum 8 years. Production period maximum 30 years.

Pipeline contract:
Period depends on the project.
The National Institute for Petroleum in the Ministry of Mineral Resources is responsible for negotiating such Concession Contracts on behalf of the Mozambican Government.

Royalty:
The Law sets the royalty at 2 % to 15 %, normally rates are 2-8 % for crude oil, depending on water depth, and 5 % for natural gas, to be taken in kind or in cash.
Corporate Income Tax:
The Corporate Income Tax rate is 32% of net profit, with no ring fencing. Development costs are depreciated over four years.
Fiscal Benefits to Investors:
The Code of Fiscal Benefits provides various investment incentives for the petroleum sector, such as exemption from import fees and VAT.

Although large gas reserves were discovered in Mozambique in the early 1960’s by Gulf Oil, they remained unexploited at the time partly owing to the absence of a regional gas market, and partly owing to war, which ended in 1992.

Renewed interest for petroleum operations in Mozambique has been created through:

• The development of large reserves of commercially exploitable natural gas in the Pande and Temane Gas Fields;

• Construction of a 865 km long high pressure steel transmission pipeline to markets in Mozambique and South Africa;

• The potential for both medium sized and large hydrocarbon accumulations in an under explored area – mainly explored 30-40 years back, on old data - often of poor data quality;

• The potential for oil accumulations in the Rovuma Basin.

Exploration History
Hydrocarbon exploration in Mozambique started early last century; with 7 wells drilled in the central part of the country on the Inhaminga uplift during the 20’s and 30’s
Exploration activities increased from 1948 with oil companies like Gulf Oil, Sunray, Hunt, Elf Aquitaine, and Gulf-Amoco.
1960’s: Gas discoveries in the Pande, Buzi and Temane Blocks.
Due to war, most exploration activity halted between the early 70’s and the early 90’s.
1990’s: Appraisal and development of the Pande and Temane Gas Fields.
1990-2003: Extensive acquisition of 2D seismic. 8 wildcat wells drilled onshore (6) and offshore (2).

Seismic
84 795 line km of 2D seismic acquired 1950-2003 (Mozambique, Rovuma Basins and Zambezi Delta).

Wells
A total of 63 wildcat and 34 appraisal wells drilled in Mozambique, onshore (82) and offshore (15).
Only 6 wildcat wells drilled the last 30 years.
Only 1 well drilled in the Mozambican onshore part of Rovuma Basin – none in the offshore part.
In 2003 Sasol carried out an extensive drilling campaign in the Pande /Temane area, 18 exploration and production wells were drilled.