Mozambique Regulates Local Content Obligations of the Concessionaires of Petroleum Rights

On July 5, 2024, the Ministry of Mineral Resources and Energy (Ministério dos Recursos Minerais e Energia - "MIREME") published Ministerial Diploma No. 55/2024 ("DM 55/2024") to establish within the scope of petroleum operations, the Mechanisms for Guiding the Obligations of Employment Programs, Education Programs, Association with Nationals, and Preferential Rights in the Contracting of Goods and Services; Conduct Adjustment; and respective reports proving compliance by the Concessionaires. Effective as of the date of its publication, DM 55/2024 aims to clarify the obligations provided for in Law No. 21/2014 (Lei dos Petróleos - "Petroleum Law"), Decree No. 34/2015 (Regulamento das Operações Petrolíferas - "Petroleum Operations Regulation"), and in the Petroleum Contracts.

We highlight the main points of DM 55/2024 below:

Employment Programs

In the selection process for hiring workers, the concessionaires must hire a minimum percentage of national individuals who have the level of competence and specialized knowledge required for the position. In addition, the Concessionaires must grant preference to national individuals residing in the "Concession Area," which also includes the areas affected by the respective petroleum operation.

Education Programs

The Concessionaires must provide education grants (i) exclusively to national individuals; (ii) preferably for national individuals residing in the Concession Area; and (iii) at least 40% for national individuals who have never worked for oil companies. The education grants may be for graduate-level, professional, and Ad Hoc (extension) education.

Contracting of Goods and Services

The contracting of Goods and Services in petroleum operations must follow one of any legal types provided for Association with Nationals (i.e., Equity Interest, Association in Participation, Consortium or Subcontracting). In any of the legal types, there must be the effective and substantive economic  involvement of a Mozambican Person must be economically involved in the process of producing the good and/or providing the service contracted by the concessionaire ("Economic Substance").

In addition, the concessionaires must grant the preference right to the nationals in the supply of goods and provision of services. This rule applies whenever the offers of the national suppliers present conditions of price, delivery time and quality equivalent to those offered by the other suppliers provided that the national supplier offers a final price not exceeding 10% of the average of the prices offered by the foreign suppliers.

Conduct Adjustment

In the event of non-compliance with the Obligations of Employment Programs, Education Programs, Association with Nationals and Preferential Rights in the Contracting of Goods and Services, the concessionaire and MIREME may enter into a Conduct Adjustment Agreement to replace any sanction with new obligations. The Conduct Adjustment Agreement entered into will be an extrajudicial enforceable title.

Report on Employment, Education and Contracting of National Goods and Services

Quarterly, the concessionaire must submit to the National Petroleum Institute (Instituto Nacional do Petróleo – “INP”) the Employment, Education and Hiring Report (Relatório de Emprego, Formação e Contratação – “REFC”) to prove compliance with the obligations contained in the DM 55/2024. The concessionaires must be able to make available to the INP all supporting records for the entire assessment period, for a minimum period of 5 years from the submission of each report.

Finally, it should be noted that any questions arising from the interpretation and execution of DM 55/2024 will be clarified by the INP.