Mozambique Invites Oil Firms In

The socialist government of Mozambique, considered by some to be hostile to western Capital, announced in late October that it was "interested in holding discussions with foreign oil companies regarding new petroleum exploration and development both onshore and offshore Mozambique."

Mozambican officials "have come to the conclusion," says one knowledgeable American academic who declined to be identified, "that western technology and particularly American technology in offshore oil is the most advanced in the world and therefore the most desirable."

On October 22, the government published a new foreign investment law, which establishes a national oil and gas company, Empresa Nacional de Hidrocar-bonetos (ENH), and sets the general terms for foreign participation in Mozambique's energy sector.

"Any foreign company or entity wanting to explore for or produce hydrocarbons within Mozambique may do so in association with ENH," the law states. "The type of association is variable and can include joint ventures, production sharing and service contracts."

The announcement of this new law marks "a loosening up" on the part of the Mozambican. government, says Fred Gaynor, Mozambique specialist at the U.S. Department of Commerce. Before "they were very circumspect," he says, "now there seems to be a liberalization."

The investment law does not appear to be a giveaway, however. It requires foreign companies to "protect the hydrocarbon reserves;" "protect the environment;" "use local goods and services;" and begin "training Mozambican nationals." It also will not compensate companies if they don't find oil. "Failing the discovery of commercially exploitable reserves, the foreign company cannot recover capital invested in Mozambique during the exploration period," the law says.

So far, "a couple of firms have expressed interest" in exploring and drilling in Mozambique, says Commerce's Gaynor. "We are looking," acknowledges a public relations officer for Marathon Oil, though there is "nothing officially yet" to report.