Revenue from Inhambane natural gas “insignificant”

Mozambique, Inhambane Barra Beach17 November 2013, Maputo — Mozambique has been exporting natural gas by pipeline to South Africa since 2004, but the revenue earned by the Mozambican state from this activity is insignificant, according to research published on 13 November by the Centre for Public Integrity (CIP), a Mozambican NGO specialising in matters of corruption and good governance.

CIP calculates that gas worth more than 700 million US dollars crosses the border annually, but the Mozambican government’s take is less than 10 million dollars a year.

CIP blames this largely on the Mozambican government’s poor negotiating tactics in its discussions with Sasol between 2000 and 2002. The CIP report points out “the petroleum sector in Mozambique is based on a production-sharing scheme where the main source of government revenue comes from an increasing share of the petroleum produced. Yet after gas was found, the government agreed in 2000 to remove the production-sharing component without securing a compensating increase in royalty and corporate income tax rates”.

The report adds that “the unreasonably low royalty and corporate income tax rates that remained in place were then fundamentally undermined by an abusive pricing agreement in 2002 that allows Sasol to purchase gas in Mozambique for a fifth of the price that it sells the gas for in South Africa”.
*Paul Fauvet

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