Entities like OVl, OIl having stake in country’s gas fields to get level playing field
In a move that will be good news for Indian oil companies like ONGC Videsh ltd (OVl) and Oil India ltd (OIl), which have a joint stake in Mozambique’s giant gas field Rovuma Area 1 worth $5.1 billion, the African nation’s outgoing Parliament has ratified a new Petroleum law which enables a fiscal regime for international entities presently working there.
The new law will mainly underline fiscal terms for foreign entities present in the country like royalties and corporate tax, and will encourage them to consolidate their presence for future participation in big ticket projects.
Mozambique, which will face Presidential elections in October this year, got the new Petroleum law cleared during the Parliamentary session, which concluded last month. Official sources told The Pioneer that this is a significant move, as till now, there was no specific fiscal regime in place for foreign companies operating in that country in the oil and gas sector.
The enabling law (allowing greater say to foreign oil and gas companies present there) has been passed by the Parliament of Mozambique, sources said. Several rounds of deliberations had taken place between various foreign oil and gas companies operating there with the outgoing President Armando Guebuza, for drafting a fresh fiscal regime, which will govern these companies, however, no success could be achieved.
Now with a proper fiscal agreement in place, foreign companies operating in Mozambique (including OVl and OIl) will have a clear idea regarding the quantum of tax they will have to pay and the royalties, which will be entailed. Also with the presence of a clear regime, foreign companies will be encouraged to increase their participation in that nation, sources said.
Till now the Petroleum law of the African nation was deeply tilted in favour of its State-owned oil and gas company called Empresa Nacional de Hidrocarbonetos (ENH). Sources privy to the development pointed out that the need for amendments in the law arose after Mozambique emerged as a new giant in the field of natural gas on the discovery of more than 100 Tcf of gas in its offshore Rovuma basin in 2012.
Though foreign companies have been operating in Mozambique all along, the laws were not favourable for them and in fact ENH and other local entities enjoyed greater flexibility in terms of participation in oil and gas ventures.The new Petroleum law will not only ensure level playing field to foreign companies there vis-à-vis local entities but will also generate greater foreign capital for the African nation.
With the discovery of huge amount of natural gas, the need for setting up an lNG terminal there has arisen. For this, not only huge tracts of land is required, but also a lot of related infrastructure is required to be set up. The new law will enable greater foreign participation for this purpose, sources said.
Production from Rovuma gas fields is expected to start from 2018 onwards and for this the setting up an lNG terminal is essential. Indian State-owned companies present there like OVl and OIl have invested $5.1 billion there, when last year they had jointly purchased Videocon’s 10 per cent stake in the Rovuma Area 1 gas field, along with another 10 per cent from the main block operator US-based Anadarko.
Therefore, the two companies could also be in the fray for the proposed lNG terminal project there, sources said. According to the changes in the Petroleum law of Mozambique, a new concession contract has been envisaged, which would enable setting up of new infrastructures for future projects of the magnitude of the upcoming lNG project there. Also the present acquisitions of foreign entities in the oil and gas fields there, could be further consolidated with the framing of the newer, friendlier law, sources pointed out.