Mozambique to reap Exxon deal rewards

MAPUTO, March 22, 2017 – ExxonMobil’s deal with Eni earlier this month for the acquisition of a 25% stake in the Area 4 block off Mozambique means a tax windfall for the government.

Speaking to reporters on Monday, a tax official said the country would see capital gains of some USD 350 million, equivalent to a tax rate of around 32%.

Under the March 9 agreement, ExxonMobil will make a cash payment of USD 2.8 billion for an indirect interest in the gas-rich asset, which is 50% owned by Eni. It operates Area 2 through a 71.4% ownership stake in Eni East Africa. The remainder is held by China National Petroleum Corporation (CNPC).

Eni and ExxonMobil will split the Eni East Africa stake, taking 35.7% each. CNPC has 28.6% while Mozambique’s ENH, Korea Gas Corporation and Galp Energia of Portugal hold 10% stakes each.

Mozambique is struggling with debts. While it had some of it written down as part of the World Bank’s Heavily Indebted Poor Countries (HIPC) initiative, the government was forced to halt HIPC repayments during the final months of 2016.

Mozambique’s debt obligations to lenders stood at 130% of GDP at the end of last year, up from 38% in 2011.

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