Mandatory Listing of Oil Companies in the Mozambican Stock Exchange: A Novel Approach to Local Content?

On August 18, 2014, Mozambique enacted the Petroleum Law No. 21/2014. The enactment of this law was to create an enabling legal framework for the new Mozambican gas sector which was buoyed by recent massive gas discoveries made in 2012 and 2013. These discoveries revealed that Mozambique sits on over a 100 tcf of recoverable gas reserves. The need to ensure proper exploitation of these reserves for the ultimate benefit of the country and citizens necessitated the new Petroleum Law which expectedly, established local content obligations for entities seeking to operate in the emerging Petroleum State.

Consistent with traditional local content obligations, the Law mandates employment and training of Mozambicans and patronage of Mozambican goods and services. With respect to employment and training of Mozambicans, Articles 12 and 15(b) of the Petroleum Law mandates petroleum exploration companies to ensure the employment and training of Mozambican nationals in technical areas and to see to their participation and management in petroleum operations. As regards patronage of Mozambican goods and services, Article 41(3) requires petroleum operations right holders, in purchasing goods and services, to give preference to Mozambican products and services which must be comparable in terms of quality to international products and services.[1] These requirements are traditional local content requirements as established by the Local Content PET Rule, i.e. Patronize, Employ and Train.

In addition to these requirements, the Mozambican Petroleum Law introduces a novel addition to the local content requirements. This is the mandatory listing requirement. Article 13(2) of the Petroleum Law provides that the oil and gas companies must be registered in the Mozambican Stock Exchange in accordance with the applicable Mozambican legislation.  There are two ways to interpret this provision. The first is by looking at Article 13 in isolation. Article 13 is titled “Promotion of National Entrepreneurship”. Article 13(1) provides that the government must create mechanisms and outline the conditions for the involvement of indigenous entrepreneurs in the oil and gas enterprises. Then Article 13(2) provides that the oil and gas companies must be registered with the Mozambican Stock Exchange. It can be argued that the oil and gas companies referred to under Article 13(2) are the oil and gas companies of indigenous entrepreneurs. This position is strengthened if consideration is taken of the fact that the term “oil and gas companies” is not used elsewhere in the Law. The other way to interpret the Article is by saying that Article 13 (2) applies to all oil and gas companies carrying out operations in Mozambique, irrespective of whether they are indigenous or foreign.

Irrespective of which interpretation is adopted, one thing is certain, there is a mandatory listing requirement under the Law. Could this be a novel approach to local content?

Harrison Declan

Editor, Energy Law Review, and author ‘Local Content in Africa’s Petroleum States: Law and Policy’.

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[1]   The Decree Law for Offshore Areas 1 and 4, published on 2^nd December, 2014 (Decree Law No. 2/2014) introduced some exceptions to this mandatory purchase requirement. See Article 10 of the Deccree Law.