Mozambique’s project momentumJanuary 18, 2019
José Manuel Caldeira, the senior partner and founder of Sal & Caldeira Advogados, talks to TOGY about the outlook for the hydrocarbons industry in the country and the legal framework for the industry. Sal & Caldeira Advogados is a local, full-service law firm.
• On growth: “If the gas projects go ahead as planned, they will be the largest private investment in Mozambique and in Africa. We’re talking about USD 40 billion-50 billion if it goes ahead as planned. Obviously that will change the Mozambican economic landscape.”
• On the legal framework: “Our industry is in its very infancy. It’s growing, and as it grows the legislation will have to evolve.”
• On investment: “When IOCs come to our jurisdiction for investment opportunities, they want to produce. They want to generate revenue for themselves and the government. We need to adjust some of our rules accordingly.”
Are you positive about the future of the oil and gas industry here?
Last year we had a period of slowdown, but things are now improving. Since our economy tanked, it has not been growing at the pace we would like. Things have gone down. They are improving slowly, but overall they have gone down from where we were four or five years ago. We are trying to recover. It will take time to reach that peak again. That is the situation in the country in general.
We are confident that as the gas projects evolve, the economy will grow and become better. As you know, if the gas projects go ahead as planned, they will be the largest private investment in Mozambique and in Africa. We’re talking about USD 40 billion-50 billion if it goes ahead as planned. Obviously that will change the Mozambican economic landscape. Our GDP will rocket to levels of developing countries, and we expect to take advantage of that as part of the industry.
How do you assess the evolution of the legal framework in Mozambique?
The legal framework is evolving at the pace of the industry. For instance, the groundbreaking decree law, applicable to the liquefied natural gas project in areas 1 and 4 of the Rovuma Basin, was enacted to enable the financing and implementation of the LNG projects and is not going to change, and we also know for a fact that the government will not want to issue another decree law for the upcoming projects. The upcoming projects are going to be governed by the general petroleum regulations, enacted from 2014, which are in place. Obviously our industry is in its very infancy. It’s growing, and as it grows the legislation will have to evolve.
We have huge gas reserves up north. We are going to start the first liquefaction trains, and as we do that, the issues we are still grappling with will probably require further reform of the legislation. The last wave of the reforms addressed the upstream and the midstream, but with the government goal to use the domestic gas to industrialise the country, the downstream segment will require some reform as well. We are going to have an influx of expats requiring services that have not been tested in this country. Before we get there, there may be a need for further legislation so we are just getting prepared for it.
Is the legal framework able to accommodate industry needs?
We cannot reinvent the wheel. This is a centenary industry – the industry has been going on for more than 200 years. These companies operate globally. If you want to have a sound, economic project, you need to follow a certain pattern. Obviously our legal framework here was not created for that. That is why the decree law enacted to fill in that gap.
When IOCs come to our jurisdiction for investment opportunities, they want to produce. They want to generate revenue for themselves and the government. We need to adjust some of our rules accordingly to allow the huge natural gas reserves to be monetised for the benefit of the country. That will continue, not only in the petroleum industry but also mining. Even the foreign exchange law was adjusted considering investments and for the needs and requirements of international investors. The government is open to that.