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REQUEST FOR A PROGRAMME OF ASSISTANCE- July 2011

INSTITUTIONAL SUPPORT TO INP 2011-2015

1. Introduction

On the 6th September 2006 the Governments of Norway and Mozambique signed an agreement for institutional support regarding the development of the Petroleum sector in Mozambique.

The overall objective of Norway’s assistance was to support and implement Mozambique’s development efforts in the Petroleum sector and to enable Mozambique to manage the petroleum resources in a manner that protects national interest.

Norway has allocated 41 million NOK for the activities under the current programme. This programme was scheduled to start the first semester of 2006 but only during the second semester of the same year the programme was started. The purpose of the programme was to develop administrative capacity over the petroleum sector through:

Development of INP as a Regulatory Authority, to enable it to perform its functions in a sustainable and competent manner

Administrative responsibilities to relevant Ministries to the Management of the petroleum resources

Development of interest groups and other stakeholders relatively to the petroleum sector.

The Ministry of Mineral Resources has through the National Petroleum Institute, the overall responsibility for the implementation of the programme.

2. Request for Assistance to further strengthen the institutional capacity and support the regulatory activities of the petroleum sector of Mozambique.

2.1 Request for assistance

The National Petroleum Institute has been set up from May 2005(see organigram in attachment 2). From its inception it has carried out a lot of activities regarding the administration/management of the Petroleum sector trough the Licensing of exploration acreage, monitoring and auditing of the performance of the agreed work programmes and budgets, supervising production activity, performed safety audits as well as the environmental compliance with the Environmental management plans.

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The government of Mozambique has gradually increased its funding of the INP activities and substantial support is also received from the industry contribution through the institutional support. However Limited funding capacity by the government and limited exploration activities do not allow INP to secure necessary funding to develop the activities above mentioned. INP activities will only become a reality if enough financial and technical resources are available to allow the fulfillment of such activities. A budget must be allocated to INP trough funds generated from its activities as well from other sources of funding.

A lot of challenges are posed to INP to continue to administrate the petroleum sector where special emphasis will be given to the adjustments of the Legal and Regulatory Framework, Improve the Petroleum Policy, procedures for resource management and planning, stronger focus on safety and emergency preparedness planning in the sector, the need for strengthening the environmental coordination with MICOA, , more focus on local participation in the sector among other things through stronger focus on training, improved dissemination of information to the public , the coordination with other relevant Ministries and by further strengthening of INP.

In Oficio number 113 to the Norwegian Embassy, the Minister of Mineral Resources has expressed the need for support from Norway to discuss options for the long term development of a gas based industry in Mozambique, based on the recent discovery in the Rovuma basin and the potential for more gas offshore Rovuma. The Minister has suggested, under the ongoing Norwegian / Mozambican cooperation in the petroleum sector to include activities directed at building up the Government’s competence of options available to Mozambique to maximize the value of the natural gas resources. Both studies to elaborate technical options and workshops between Mozambican government representatives, stakeholders and Norwegian experts would be useful. The planned work on petroleum policy issues under the programme will be a valuable supplement to the recently published “Strategy for the Development of the natural gas market in Mozambique” (Resolution No. 64/2009).

Mozambique recognizes that Norway does have very relevant experience in managing petroleum resources and administration of such an important sector. Continued access to such experience is very important to Mozambique at this point in time due to the significant discovery of gas in the new petroleum province, the Rovuma basin.

MIREM published in May a “Strategy for Human Resource Training and Capacity building for the Mineral Resource Sector”. Support from Norway under the new programme to fulfill training and capacity building requirements will be most welcome. A delegation from Ministry of Education and INP participated at the workshop on VET (vocational education and training) in Cape Town in June hosted by RKK (Rogaland Kurs og Kompetansesenter) and Mozambique understands that Norway has very valuable experience in VET which most likely can be of

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relevance for Mozambique and which will be necessary to achieve the national goals for national participation in the petroleum sector, particularly for increasing the use of local goods and services.

The Government of Mozambique requests therefore, the assistance from Norway in 52 millions NOK for the technical support and establishment of the INP for 4 years during the period 2010-2014. The Government of Mozambique will also request additional funds for training, education and capacity building and the Government support the separate request from ENH to enhance the Company’s capacity to undertake its role as manager of the State Participating Interest in the gas discoveries.

3. The work programme for an extension of the sector agreement Goal and Objective

Goal: The economic development and welfare in Mozambique is enhanced trough effective and sustainable management of the petroleum sector.

Purpose: to improve the capacity of INP to manage the core functions of its mandate as the national petroleum sector regulator for Mozambqiue.

Key issues: To reach the goal of the programme, the following Key Issues will together compose the main content of the programme:

1. Legal and regulatory Framework

2. Policy and strategy

3. Resource assessment and licensing

4. Monitoring and supervision of petroleum operations

5. Emergency Preparedness

6. Management of Petroleum data

7. Institutional development

8. Use of local goods and services

9. Diffusion of Information to the public

10. Coordination amongst relevant regulatory institutions

3.1 Key Objectives and outputs

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3.1.1 – Legal and Regulatory Framework

3.1.1.1 - Key Objective

Establish an efficient legal, regulatory and contractual framework based on international best practice with adequate implementing capacity and routines in place.

3.1.1.2 - Baselines

3.1.1.2.1 - Further develop the Petroleum Legal and regulatory Framework

Through the negotiations of the 2nd concession round contracts onward, important experience was gathered as to the functionality of the model contract, the Petroleum Law and the Petroleum regulations. The legal support under the programme made it possible to introduce improvements to the model contract specifically regarding the negotiable items such as institutional support, training funds, Carried interest, cost recovery , R-factor. Some changes are drafted that may facilitate improvements in the Petroleum Operations Regulation. Recommendations as to further improvements in the legal framework has also been made that will take into consideration the adjustments on the definition in the law to make them more precise and comprise all the phases of exploration activities in all the phases from reconnaissance, exploration, development and decommission.

The Environmental aspects for the Petroleum Sector are not covered in the Environmental Regulation on the Environmental Impact Assessment Process approved by decree 45/2004. They were clearly excluded due to the specificity of the Petroleum Sectors and as such the Environmental Regulations was developed in order to complete the required regulatory framework and was approved by the Council of Ministers in August 2010. INP will discuss the new regulation with Micoa to see whether further subordinat regulations or changes are required for efficient implementation of the regulations.

The Regulation for Licensing of Petroleum installations has also been approved by Council of Ministers in 2009.

The required INP personnel resources and financial resources were allocated to allow effective implementation of the Petroleum administration. Training in the implementation of the legal framework was required and the establishment of a legal database for precedent decisions and legal practice was identified as a task for the next programme.

Even though the INP regulatory capacity has been significantly improved under the last programme there is a need to strengthen the legal framework operability and the legal capacity of the INP. Existing supervisory procedures need to be updated and supplemented and the legal

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capacity needs to be strengthened (both in number and experience). Precedence cases need to be systemized and the interaction between the legal staff, the management, the MIREM and the INP technical staff need to be strengthened.

3.1.1.2.2 - Submission for approval of the amended ROP and developed Environmental regulations and the new model concession contracts

The Ministry of Mineral Resources (MIREM) has the mandate to develop the Legal Framework. INP being the institution dealing with the administration of the Petroleum sector will have to develop appropriate legislation and submit to the Ministry which in turn will have to present it to the cabinet for approval. To allow the amendment of the Law and Petroleum regulations INP with the support of the Norwegian Law firm Simonsen have already identified the aspects of these legal instruments that need to be addressed in the review to be undertaken that will encompass aspect that are related to the definitions in the law, development and end of production phases. If changes are undertaken to the law and the Petroleum regulations, the model concession contract will have to be updated (and made simpler).

3.1.1.2.3 - Promote the Petroleum legislation for the relevant petroleum sector technical staff

The Petroleum sector cooperates with other institutions relevant to the petroleum sector when it comes to the harmonization of Exploration and Production Contracts as well as in the implementation of monitoring of exploration and production activities. To make technical staff of these sectors aware regarding the Petroleum legislation it is necessary to promote workshops or seminars with institutions relevant to the petroleum sector mainly at governmental level. This activity was started in 2007, with the discussion in relation to the Model Exploration and Production Concession Contract, with the involvement of lawyers from the Ministries of Finances, Environment, Mineral Resources, Fisheries, Transports, Tourism, Foreign Affairs, Administrative Tribunal, President’s Office and ENH. These legal personnel undertook afterword a tour to Norway where they had the opportunity to visit institutions such as The Norwegian Petroleum Directorate, The Tax Authority of Norway and The Norwegian Climate and Pollution Authority.

3.1.1.2.4 - Approval and publication of the petroleum regulation guidelines

The monitoring activity during the last 5 years has also detected areas of possible improvements to the draft guideline that exist from 2005. There is a need to update and complete it in parallel with regulatory review in order to assist the industry to understand and implement the Petroleum Regulations.

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3.1.1.3 - Key Outputs

An amended the Regulation of Petroleum Operations (ROP), and new model concession contracts submitted for approval

Approval and publication of the petroleum regulation guideline The new Legal and Regulatory framework for the Petroleum Sector Promoted for the

relevant petroleum sector technical staff An improved institutional coordination in the petroleum sector A legal archive and precedence register in place

3.1.1.4 - Key activity

Optimization of the regulatory and contractual framework to further reduce the negotiable items in the contracts.

Continued legal capacity building and expand this capacity to other relevant institutions Create a legal library Further develop the Legal precedence register Complete the petroleum regulation guidelines Develop institutional coordination regulation for the petroleum sector Negotiation training for petroleum concession contracts.

3.1.2 - Policy and strategy

3.1.2.1 - Key ObjectiveEstablish a comprehensive policy for the petroleum sector and elaborate strategy documents with particular focus on recent new discoveries in the Rovuma Basin.

3.1.2.2 - Baselines3.1.2.2.1 - Review and Submit the Petroleum Policy for Government approval

Mozambique has not yet developed a comprehensive petroleum policy. With the approval of the Petroleum Law 3/2001 and the Regulation of Petroleum Operations of 2004 and the correspondent Model contract, the Royalty law 12/2007 and Fiscal Incentives Law 13/2007 (for the extractive industries) important policy issues were discussed. Other Policy instruments were approved in this course, such as the Licensing and Training policy/strategy more recent legal instruments such as the Licensing of Petroleum Installations Regulations and the Specific Petroleum Sector Environmental Regulation were put in place in 2009/10. A holistic policy

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comprising the policy elements of the different pieces of legislation and strategies is required. To conform to the dynamics of development of the petroleum sector in Mozambique.

With considerable development of petroleum operations and discovery of large petroleum resources and with the approval of EPCC from the 2006 license round, such Petroleum Policy is now required.

3.1.2.2.2 - Licensing strategy reviewed and submitted for Government approval

INP has developed the strategy of Licensing of exploration acreage. The approved licensing strategy sets the main principles for the licensing of exploration acreage, basically which sort of concessions are to be granted for specific areas, the size of areas to be awarded, and the frequency of concession of acreage in bid rounds. As exploration activities are progressing and the maturity of the different petroleum provinces evolves, there is a need to update the approved Strategy to cope with the new developments as a result of new data acquisition, new discoveries and development of new views in terms of prospectivity of the different areas across Mozambique sedimentary Basins.

3.1.2.2.3 - Prepare and approve a Strategic plan for the petroleum sector

The INP started back in 2006 with the preparation of the Scenarios Study to foresee possible application of petroleum resources discovered and available in Mozambique as a result of exploration activities as well as the development of processing and transportation infra-structures, training and employment of human resources. The process of the Scenarios study was finished in 2010. It is expected that a strategic plan for the petroleum sector can be drawn for the scenarios study that will guide the development of the petroleum sector in Mozambique in line with the Petroleum Resources, Human Resources and Infra-structures. There is however a need to analyze in more details the consequences of the Rovuma discoveries. If a new offshore petroleum province can be developed, the consequences for Mozambique can be very important. There is also a need to strengthen the knowledge to raise the understanding in MREM /INP and among important civil servants and members of parliament of options available to Mozambique for utilizing the new resources.

3.1.2.2.4 - Train economists in conducting strategic and scenario planning

The scenarios studies were prepared using expatriate consultant. It is critical to have at least one Mozambican economist trained to perform such kind of studies to cater with possible increase of discovered petroleum resources and the need to make feasible planning of these resources.

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3.1.2.2.5 - Secure the Area proposed in the submission to UNCLOS with potential to extend the continental shelf claimed by Mozambique

INP has been engaged in the process of claiming the continental shelf extension beyond 200 nautical miles in collaboration with Institute of Maritime and Border Affairs (IMAF) as the organization leading the continental shelf extension commission. INP provided the major part of the financial funds needed for the task and provided technical competence to develop the submission. These funds were used in acquisition of the hydrographic and seismic data, the purchase of Information Technology equipment and the respective softwares and to organize consultation meetings with other neighboring countries similarly involved in the claim process under UNCLOS.

A preliminary claim was presented to the United Nations early May 2009 by the Mozambican commission on the extension of the continental shelf beyond 200 nautical miles. In 2010 Mozambique submitted the final claim document to the United Nations. Mozambique will have to undertake follow up activities under the new programme (limited work) depending on recommendations from the United Nations.

3.1.2.2.6 - Active bilateral commission(s) in place

The bilateral Gas commission between Mozambique and South Africa was created to facilitate Pande/Temane Natural Gas Venture. Since the inception of the Pande/Temane natural gas venture back in 2001 this commission discussed issues like pipeline third part access, HSE and metering issues. The recent discussions were focused on the issue of unaccounted gas in the export pipeline. The creation of the transborder agreement for the transportation of petroleum products was also discussed.

The Bilateral Commission could also be required to handle Petroleum issues between Mozambique and Tanzania and possibly also Zambia and as well as the future developments in the region. A seminar for the region is planned to be held in order to transmit the experience of the Commission on petroleum related matters to increase the awareness of the region on this regard. With the development of the petroleum sector (Resources and infrastructure) in Mozambique the country may play an important role for the region.


A draft Petroleum Policy for Government approval An updated licensing strategy for Government approval A Strategic plan for the petroleum sector Established capacity to undertake strategic and scenario planning

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Response provided to UNCLOS on questions to the Mozambique submission for extension of the continental shelf – final approval of submission

Improved regional cooperation Cross border issues solved amicably

3.1.2.3 - Key activities

Update the current exploration strategy which will include a focus on using licensing round offering a portfolio of acreage representing high and low exploration risk

Improve planning capacity tools and procedures Develop scenarios and strategic plans as required Continue the work under the Bilateral commission between Mozambique and South

Africa and establish similar organization regarding the activities in Rovuma Basin. Support MIREM on development of tariffs studies and policy issues and development training in

petroleum related subjects. Revise and update the Petroleum Policy in line with international standards incorporating

aspects such as:o optimization of the Legislation

o coordination with other relevant institutions

o resource management issues such as:

how to optimize the recovery of the petroleum resources

the optimal use of infra-structures

the principle for tariffs

the importance of assessment of the complete value chain

abandonment plan

resource accounting systems.

o Data

how to expand and maintain databases, tape storage and document archives,

how are reports delivered and in which format and timing guidelines.

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Enhancement of transparency in the sector trough detailed rules on confidentiality and publicity and procedures for release of data

o Environmental matters such as:

minimum emissions goals

the polluter pay principle

the use of environmentally friendly technology (best available technology not excessive cost – BATNEC principle)

the development of Strategic Environmental Assessment Studies an

the definition of supervisory responsibilities.

o How the Safety issues are going to be addressed in the Petroleum Policy is also relevant with the need to define

minimum goals and

Supervisory Philosophy (self control principle)and

Industry being responsible for own risk assessments

Auditing being risk based

the Emergency preparedness plans

Coordination between public institutions

Establishment of response capacities.

Fiscal system control

o fiscal metering audits

o cost audits as well as the impact on the Macro-economic financial management will have to be addressed in the Petroleum Policy.

A policy for training for the extractive industries , including the petroleum sector has been presented to the Council of Ministers .Its implementation will be important for the development of the petroleum exploration and production in the country, making maximum use of indigenous resources. There will be a need to map the requirements in terms of personnel to serve the petroleum sector and the capacity

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and quality of the present training options. Training of trainers will most likely be needed as well as some funding of programmes specially developed for curriculum developments and update of training equipment. The new programme will have to focus on planning issues to strengthen the capacity to make scenarios for the petroleum sector, even more relevant after new Rovuma gas discovery.

The Local content issue was not a central issue in the previous programme, but the scenario work has made it clear that further INP involvement is important. Local content should be an important issue to be considered under the new programme. In view of the significant increase of exploration and production projects that will need the involvement of the local industry and people. Initial contacts have been made with Rogaland Competence and Training Centre (RKK) to make a first mapping of the need to strengthen vocational training. Contract strategies, QA/QC training, and Oracle type databases for vendor’s contracts are other possible outputs to be considered

3.1.3 - Resource assessment and Licensing


Have the resource inventory system in place with updated resource estimates for fields and discoveries. Promotion and licensing undertaken according to the latest licensing policy.

3.1.3.2 - Baselines

3.1.3.2.1 - Train the newly recruited Geologists and Geophysicists in assessment of petroleum resources

In connection with the launching of the Second, third and fourth licensing round an evaluation of the petroleum potential of the central Mozambique Basin was performed by INP with support from consultancy of Petroleum Geo Services (PGS).

To strengthen the in-house resource assessment it is necessary to involve several of the INP geosciences staff in intensive training, to strengthen in-house competence and capacity. Assistance from external mentors may be useful to consider. As well as on-the-job training with oil companies or NPD may be relevant.

A special focus will be on updating the Pande / Temane resource assessment in view of the new seismic and well data that is now available. It is also important to consider a resource assessment of the new discovery in the block 16/19 and in the Rovuma basin. Hopefully it will

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also be possible for discoveries to extend the work into simulation of future production. In addition other opened areas need to be analyzed as regards their potential.

3.1.3.2.2 - Have the resource inventory system in place and operational

The Resources resulting from the Exploration activities in different exploration areas need to be systematized in a manner that contributes to the knowledge of the resources into different categories. As such, the basis for the creation of the resource inventory has been under consideration at the same time that the integrated data management system is being established. A resource classification system should be adopted prior to establishment of resource inventory system.

3.1.3.2.3 - Promote the Mozambique Petroleum potential

INP carried out three bid rounds from 2005 up to now, concession round 2, 3 and 4. As a result of this bid rounds INP undertook participation in major promotional conferences like the AAPG (In United States) and the Africa Upstream (South Africa) mainly and in launching events in London. These promotional campaigns have resulted in award of areas successfully in second round and with only two areas out of eleven in the second round. The limited award of areas in the third round was probably due to the limited promotional campaign targeting the conference above mentioned, the timing of the launching of the rounds (low oil price) and due to the composition of acreage in the rounds (too high risk).

For future rounds it will be important to organize more road shows to a wide range of oil and gas conferences, analyze the market condition better and to put together a balanced mix of low and high prospectivity acreage. INP under the programme received significant support to develop promotional material and web site for publication. Establishment of increased in-house web competence, and routines for updating the web site regularly is needed under the new programme. Further development of the web site is also desirable. There is a need for the establishment of routines for INP/MIREM press releases and publishing on the INP web site, Publication of periodic magazines with the information of oil and gas exploration and production is to be considered as well.

3.1.3.2.4 - Train the legal, Geological, geophysical and staff in contracts negotiations

As mentioned before, the INP launched the second licensing round over the Rovuma Basin areas in June 2005. The majority of the awarded companies that won the bids negotiated the contracts during 2006 and signed the contracts from late 2006 namely Anadarko, ENI and Artumas.

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Successful negotiations were carried out for the Onshore Zambezi Delta, Sofala and M10 areas in Mozambique Basin. Petronas, that was awarded the areas 3 & 6 in Rovuma Basin Licensing round in 2006, restarted and finalized the negotiations with INP early 2008 after it accepted the concept of parent company bank guarantee.

As a result of the third bid round, Sasol Petroleum International of South Africa was awarded the Area B onshore Mozambique Basin. The negotiations of the concession contract with this company took quite some time due to the same concerns of Parent company guarantee as wells as foreign exchange regime imposed by the Bank of Mozambique. After all these issues the negotiations were finalized in 2010.

Even though the capacity to negotiate concession contracts is improved, specialist support will still be needed for the forthcoming negotiations. It will be important to stress the element of training of the legal as well as the G & G and Engineering staff in this process.

3.1.3.2.4 - Launch two license rounds to award exploration and production areas

The License strategy provides for launching of bid rounds in periodicity which extends up to three years. During the course of the institutional support for the petroleum sector for the period 2010 – 2014 at least two license rounds should be undertaken.

3.1.3.2.5 - Secure acquisition of spec seismic data

WesternGeco signed an agreement with the Government of Mozambique in 1998 under which some seismic data were acquired in 1998, 1999 and in 2000 and used for the promotion of Mozambique petroleum potential. Due to exclusive rights over the area where those data were acquired no other data were acquired for about 10 years. Having the agreement lapsed in June 2010, it is the right time to secure the acquisition, trough a tender process, of modern seismic data that can help to promote the hydrocarbon potential along the Mozambique and Rovuma Basins mainly.


Updated Resource inventory in discovered fields and undiscovered areas with potential

resources particularly in Pande/Temane, Inhassoro, 16 & 19 Blocks and Rovuma

exploration areas.

3-4 Geologists and Geophysicists trained in assessment of petroleum resources

Updated promotion material and participation in promotion activities

1 – 2 licensing rounds

4- 8 new concession contracts approved

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Agreements with seismic companies for collection of spec seismic data

A fully trained contract negotiation team in place


Continue to develop competence and capacity to be able to carry out in- house analysis and interpretation of geological and geophysical data to perform resource evaluation. Carry out in-house interpretation projects:

o Update and finalize the Pande/Temane resource estimates o 16&19 resource estimateso Rovuma Basin discoverieso prospect mapping and evaluation in areas being considered for licensing rounds

Maintain the petroleum inventory and consolidate the resource accounting system Negotiation of Spec seismic contract. Planning and implementation of 1-2 licensing rounds Establishing promotion material including updated web pages and data rooms Negotiation of new concession contracts using a new and updated model contract

3.1.4 - Monitoring and supervision of petroleum operations


To have an efficient monitoring and supervision system in place to audit the petroleum operations as regards efficient resource management, fiscal metering, health, safety and environmental management.

3.1.4.2 - Baselines

3.1.4.2.1 - Improve Procedures for monitoring and auditing of petroleum operations

The monitoring and auditing of petroleum operations are undertaken under the quarterly technical meetings and management meetings provisioned under the contracts as well, as verification of operations in the field when drilling for exploration and development is undertaken under the implementation of the development of production infra-structures (PDO). During the production phase, auditing of production installations is undertaken with focus on Health, Safety, Environment (HSE) and on fiscal metering.

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The procedures for the monitoring and auditing of petroleum operation were also established about three year ago. Taking into consideration that a guideline for Regulation of Petroleum operations need to be updated and used internally at INP in the daily administration of petroleum operations, it is cautious to improve the monitoring and auditing procedures to be aligned with the referred guidelines to petroleum operations to be reviewed. These routines and procedures will set the ground to standardize and make efficient the monitoring and supervisory activities.

Specific procedures for the reporting of natural gas production should be established to improve the control of resources that are being exported and also certify/crosscheck the amounts reported by the producer.

INP Secured and controlled mass balancing procedures by conducting audits of the pipeline's input and output at fiscal metering stations (ROMPCO, Matola Gas Company and ENH) with good impact in the quality of information provided by the fiscal meters and the problem of unaccounted gas has been minimized due to improved experience with the system gained by the operator of the Pande/Temane gas fields (Sasol) after recommendations from INP audits.

Continuously update of the internal administrative procedures to control production, royalty gas payments and tariffs have been undertaken, but still need to be strengthened.

3.1.4.2.2 - Establish reporting format for the petroleum operations

The oil companies operating in Mozambique have been providing the reports on petroleum operations in non systematic manner without a model on how they should report on activities undertaken. This reporting by oil companies to the authorities makes the management of information very difficult to handle. It is important that such model for reporting can be established to allow efficiency in management of information from oil companies.

INP established and agreed with the operator from Pande and Temane gas field a format of production and fiscal report. This format needs to be reviewed to be according to the needs of INP. Information of the production per well needs to be reinitiated and separated information from Pande and Temane as well.

INP started the establishment of a module in the INP database to record and monitor production and operator's activities as well as other downstream activity (Condensate export by Sasol/Petromoc) which may help in performing an adequate monitoring and supervision of the petroleum operations, particularly the production. This work need to be continued in the next programme. Scanning of relevant historical documents need to be done to be included in the data base as well.

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3.1.4.2.3 - Developed capacity to implement the monitoring and supervisory tools

Important general auditing capacity has been established within INP, but capacity and skill still need improvement.

Recently 2 technical staff from INP has received training in Petroleum Engineering to be capable to understand petroleum operations and develop crucial skills that will allow identification of deviation during the auditing and supervisory activity.

The natural gas producing fields are equipped with very important devices to measure the quantities of hydrocarbons produced distributed and exported and as such those devices are critical for the revenues generated for both the States and the Oil companies. This devices need to be checked regularly trough audits for their operability to make sure that are not imbalances on the resources produced and distributed or exported versus the revenues. The audit of the metering stations currently is done primarily with the support from the NPD specialist. It is required that capacity to perform metering systems audit is established trough training of personnel with engineering background in this matters.

Training in Metering instruments has been put into priority and tailored courses had been prepared for the staff of INP. Between October and November of 2010 technical staff from INP will attend a specific training in Angola prior to the annually planned audit to the metering system.

The Fiscal Administration (ATM) has expressed interest to be an observer at such audits. Routines for planning and follow up are important and need to be further improved. Both Auditing and calibration of meters are activities that are important candidates to be included in new programme

Training of personnel from Ministry of Finance working with the royalty/fiscal control has taken place and need further strengthening. It is important that under the new institutional support programme this cooperation on fiscal issues should be continued.


Established well functioning routines and procedures and for monitoring and auditing petroleum operations

Establishment of reporting format for the exploration, production operations and HSE aspects

Establish HSE standards followed by the industry Developed capacity to implement the monitoring and supervisory tools:

2-3 persons with responsibility for HS&E

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2-3 persons with responsibility for Fiscal Metering 3-4 persons with responsibility for monitoring exploration 3-4 persons with responsibility for development and production 2-3 legal experts to support the monitoring teams


Establish good internal routines and procedures for monitoring of existing EPC´s, including exploration and production Drilling programme, existing processing and pipeline infra-structures and the news infra structures to be built. These routines and procedures will include as well a rational organisational structure and delegation of authority in the daily work in the following-up of licenses activities.

Develop routines to ensure that all required reporting takes place within the expected deadlines – and to ensure that all technical reports, evaluation reports, etc have a high quality standard and appropriate format to allow standardization of information submitted to INP by operators

Monitoring of production; carry out audits on fiscal metering facilities, controlling royalty payments and costs, controlling production reports, assisting MoF in fiscal control

Monitoring and auditing of Environmental aspects such as EIA and SEA and Health and safety (HSE) in cooperation with MICOA and Ministry of Labor

o Monitoring of ongoing exploration and production Drilling programme, existing processing and pipeline infra-structures and the news infra structures to be built Monitoring of the new PDO’s in the planning and approval process

o Development of Emergency preparedness management systems and undertake desktop exercises with relevant institutions.

3.1.5 - Emergency Preparedness3.1.5.1 - Key Objective

To have an Emergency Preparedness (EP) Planning System in place for the petroleum sector where the responsibilities for the participants from the industry and government and other official organizations are well defined.

3.1.5.2 - Baselines

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Under the existing programme several safety audits have been undertaken with the support from Petroleum Safety Authority (PSA). An emergency preparedness workshop was also carried out in Matola focusing on the operation of high pressure pipelines in populated areas mainly the operation of transportation of natural gas from Ressano Garcia to Matola area by Matola Gas Company (MGC). This workshop involved the population living close to the pipeline route, the fire fighters and Ministry of Health, the Directorate of Energy and the gas industry. Continued supervision of health and safety issues and general follow up activities will be required especially as regard to the activity in the newly opened petroleum province in Rovuma.

It will be important that the petroleum operations administrator (INP), the Petroleum industry, the Center for Disasters Combat and Prevention as well as the Ministries of Home Affairs, Energy, Health, Environment, MIREM, Industry and other relevant institutions are involved in action towards the prevention of risk in petroleum operations as well as in exercises to Combat possible accidents. 3.1.5.3 - Key Outputs

Established emergency response planning guidelines to be followed by industry Established procedures for emergency response in case of accidents

Developed emergency preparedness management systems and desktop exercises undertaken with relevant institutions and industry.


Draft and approve the emergency preparedness guidelines Draft and approve the emergency response procedures Develop the management systems for emergency preparedness and undertaken

training in its implementation with the industry

3.1.6 - Management of petroleum data


To have an efficient data management solution and IT system in place, based on a consistent data model, a reference/administrative database for the most important types of data, modern data storage media and well maintained hardware, allowing efficient use of GIS and other petroleum management software systems.

3.1.6.2 - Baselines

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3.1.6.2.1 - Expand and maintain the INP data model / the reference database including updated GIS (include production, resource inventory, etc)Until recently the data stored at the Data Center not systematically organized. In view to bring all the data to a common database, INP started in 2008 with the development of an integrated data base to bring together all exploration and production related data as well as information regarding contract’s management. Two workshops on this regards were organized between INP and NPD and a third workshop is scheduled to October 2010 and it will highlight how to handle production data in the reference data base.

3.1.6.2.2 - Improve the procedures for the operation and maintenance of the data centre, tape storage, document archive and update software/hardware in use

The Data Center has been operational since 1999 providing and receiving data to/from the industry. To respond the industry needs with the desired quality of services, procedures were developed for the operation and maintenance of the data center what set routines for better management of activities at the data center. Due to increasing petroleum operations in Mozambique the data center has been required to provide data to the industry and a lot of data have been delivered by oil companies to the center. As a way to improve the services at the data center, there is a need to improve the existing procedures for the operation of the data center to allow it to be more efficient.

3.1.6.2.3 - Finalize the construction of new core storage and transfer part of the cores from Vilanculos to the new storage

The core storage which holds core samples resulting from exploration activities in Mozambique is located in Vilanculos, Inhambane Province, about 800 km North of Maputo. This has been a major handicap to oil companies’ interest in reviewing data if considering Maputo as the Capital where the administration of the petroleum sector is located. The construction of core storage was decided and the construction initiated in 2009. The cores storage should be finalized the current year of 2010 to allow the acquisition of equipment for the operation of core storage and finally allow that some cores samples can be relocated to Maputo and new samples can be handled by this new storage.

3.1.6.2.4 - All seismic and well data transcribed to modern tapes ahead of 3590 and other storage media

INP data center used to safe guard the seismic data in an old format tapes that have been transcribed to 3480/90. About 16000 tapes of the type 3480 were transcribed to 3590 tapes. INP has been receiving from recent exploration operations, data stored in modern tapes of the

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types 3592. Under this pace, it can be realized that technology is growing fast. Should the new Medias come along, INP will be in position to handle such data with purchase of correspondent equipment and storage Medias and training in the use of the Magma transcription software.

3.1.6.2.5 – Update Standards and procedures for data deliveries

The Data Center developed procedures for data delivery by oil companies in conformance with international standards. These standards have been evolving as a result of new technological developments. To align the existing standards with this technological development there is a need to review and update the existing standards that were developed back in 2007.

3.1.6.2.6 - Training of personnel in data management

As a result of technological dynamic related to the Petroleum industry, data transcription equipment, data Medias and softwares are changing. Hence, training for the personnel in data management is needed as to provide the staff with capacity to handle the referred changes


An Expanded and maintained INP data model / reference database, including updated GIS (included production, resource inventory, etc)

Improved procedures for the operation and maintenance of the data centre, tape storage, document archive and updated software/hardware in use

A new core storage and part of the cores from Vilanculos transferred to the new storage

All seismic and well data transcribed to modern tapes ahead of 3590 and other storage media

Standards and procedures on data deliveries updated Trained personnel in data management, IT and database operation and maintenance


Expand and maintain the INP data model / the reference database including updated GIS (include production, resource inventory, environmental data, HSE

Improved procedures for the operation and maintenance of the data centre, tape storage and document archive Update software and hardware to improve the efficiency of the data centre

Finalize the construction of a new core storage in Maputo and purchase equipment for the storage as well as proceed with the transfer part of the cores stored in Vilanculos to

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Maputo and archive all the new cores and other samples received from petroleum operations at this new storage.

Commence a new transcription project to the most updated storage media, presently 3592 tapes and other storage media

Include some environment data in GIS Training of DM and ICT personnel at the centre. Improving Reporting guidelines

3.1.7 - Local goods and services

3.1.7.1 - Key ObjectiveAn increased use of Mozambican goods and services in the upstream petroleum sector in Mozambique and in the region.

3.1.7.2 - Baselines3.1.7.2.1 Establishment of a platform for the information of potential suppliers to the petroleum industry

The Petroleum operations being carried out in Mozambique have been traditionally supplied by expatriate companies that undertake these duties in detriment of the local suppliers that can perform this activity.

To establish a platform to information local suppliers to be aware of the opportunities to suppliers goods and services and make some income and employing local workers is of outmost importance. It will be important that INP can establish a system to inform these potential suppliers of the existing opportunities. Contract strategies, QA/QC training, and Oracle type databases for vendor’s contracts are other possible outputs to be considered

3.1.7.2.2 - Vocational and Universtity training towards the petroleum sector established

The majority of workers involved in Petroleum operations are expatriate that undertake basic duties. The trainining for such jobs could be undertaken locally. It is important that a mapping of the vocational training currently being offered in Mozambique, that can serve the petroleum industry is pursued to allow a more structured definition of these training courses. In this way, Mozambican local content can be significantly improved trough the contribution of specialized workers. At University level it is also important that mapping of relevant petroleum related courses can be mapped with the final objective of establishing these courses locally to serve the

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industry as well. Initial contacts have been made with Rogaland Competence and Training Centre (RKK) to make a first mapping of the need to strengthen vocational training.

3.1.7.3 - Key outputs

Established a platform for improved information of the petroleum sector development to be used by the local suppliers of goods and services

Improved understanding among the suppliers of the Quality Assurance (QA) and Quality Control (QC) systems and contracts used by the petroleum industry

Vocational training needs mapped in coordination with Ministry of Education and MIREM

Vocational training established in important disciplines towards the petroleum sector to increase production quality and capacity

University training supported


Training of Mozambicans to develop skills particularly needed in this sector at vocational and tertiary education level.

Identify training opportunities and undertake mapping of the training need in important areas. Training of potential suppliers in Quality assurance and quality control (QAQC) in delivery of manufactured good to this sector

Improvement of/or Training of potential suppliers to the industry in supply contracts. Establishment of information data base for new petroleum contracts

3.1.8 - Institutional development


To make the INP organization better prepared to meet the future challenges in the petroleum sector in such a way that the industry is well served, Mozambican interests are well taken care of and the employees will experience a good working environment, tasks that develop the competence of the individual and career opportunities for the future.

3.1.8.2 - Baselines

3.1.8.2.1 Recruitment of new staff

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2 – 4 G and G personnel, 2 – 4 petroleum engineers (Facility, pipeline, drilling or reservoir, HS&E), 2 DM / IT experts and 1 economist. To allow INP to respond more efficiently there will be a need to recruit more technical staff in view of its limited staff for the time being. The Recruitment of the above-mentined personnel will be required to cater for the required efficiency.

3.1.8.2.2 - All managers undertake management training

In view of the growing level of activities at the petroleum sector and the increasing importance of this sector in the Mozambican society it is important that the management of INP is continuously trained in management to improve their efficiency to deal with the industry as well as internal issues at INP such the increasing growth of the technical staff, the efficient performance of this staff.

3.1.8.2.3- Development and establishment of appropriate management tools

After its establishment back in 2005 INP developed its internal regulation which apart from mentioning the main duties of INP establish how the institution the administrative process is undertaken. To strengthen the management and efficiency of INP it will be necessary further management tools on recruitment, IT, conduct, and information.


An increase in professional capacity by Recruitment and training of Geoscientists, Petroleum Engineers, Lawyers, economists and data custodians

Management training undertaken for the managers and technical training for the staff.

Improved management tools regarding personnel, financial resources and documents Assessment of the appropriateness of the current organisation INP a one stop shop with cooperation agreements with important cooperating institutions


General institutional support for INP/MIREM Assess the adequacy of the organisational structure and implement improvements. Undertake management training and technical training for the staff. Improve management tools regarding personnel, financial resources and documents. Prepare procedures to turn INP to be one stop shop Coordination / liaison agreements and support agreements with co-operating

institutions (ref output 2)

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3.1.9 Diffusion of Information to the public


To improve the quality of the INP information products; the web site, the press releases, statistical data and particular publications made in cooperation with MINPET.

3.1.9.2 - Baselines

3.1.9.2.1 - Train staff in information management skills

A lot of information is generated in petroleum exploration and production and part of this may need to be conveyed to the industry and the public such as magazines, websites, Atlas, Journals and leaflets. The staff involved in handling of such information should be trained to screen the information to the public and industry.

3.1.9.2.2 - Assist MIREM in statistical information and publication of matters related to petroleum operations

All the mining and petroleum activities are reported to the MIREM to allow statistical records on production, impact of minerals on the economy. INP take care of exploration of oil gas activities, as such, it should be in position to provide such information to the Department of Planning at MIREM to allow such records.

3.1.9.2.3 - Development of routines and standards and regular issuing of press releases in connection with special events regarding petroleum activity

The press releases in publication as a consequence of activities under the exploration and production of hydrocarbons have published without observing established standards. To allow INP to provide aligned information in case of press releases there is a need to develop such standards.

3.1.9.2.4 - Develop detailed rules on confidentiality and publicity and procedures for release of data

The diffusion of information related to petroleum operations to the public has to be carefully screened, taking into consideration that most of the contracts have confidentially clause which

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prevents some sort of information to be published. In that view, it is of outmost importance to develop procedures for that screening of data before publicity.


Staff Trained in information management skills

Updated INP web site (fact page on internet), and ensured a continuously updated flow of information and data for oil companies, government offices, other stakeholders and the public in general. Assisted MIREM in statistical information and publication of matters related to petroleum operations

Routines and standards Developed and regular press releases issued in connection with special events regarding petroleum activity

Developed detailed rules on confidentiality and publicity and procedures and work processes for release of data


Improve the information management skills of INP’s employees

Further develop the INP web site (fact page on internet), and ensure a continuously updated flow of information and data for oil companies, government offices, other stakeholders and the public in general.

Provide assistance to the MIREM publication regarding petroleum sector issues Improve the statistical information provided to Planning and Development

Directorate in MIREM (DPD)

Further improvement of routines and standards for press releases, and regular issuing of press releases in connection with special events regarding petroleum activity.

Develop detailed rules on confidentiality/publicity and procedures and work processes for release of data

3.1.10 - Active Coordination amongst relevant regulatory institutions

3.1.10.1 - Key Objetive

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To facilitate among all relevant regulatory institutions a well coordinated and efficient handling of issues of policy, planning and regulatory character and specific applications from industry participants.

3.1.10.2 - Baselines

3.1.10.2.1 - Ministry of Mineral Resources

Cooperation between INP and Ministry of Mineral resources have been crucial as the INP report to the Ministry in matters related to Exploration, Development and Production Petroleum related Policies.

The Petroleum Exploration and Production contracts has been a subject of major cooperation since these contracts has to be submitted to the Council of Ministers for approval and as such INP after negotiating them submit to the MIREM for the approval to the Council of Ministers.

In the administration of Petroleum operations INP interact with MIREM giving its advice in relation to the requests submitted by the Oil companies.

Recently MIREM approved the engagement of an independent consultant to elaborate a methodology study for the gas transportation tariffs in order to have procedures of how the gas tariffs price are set and a clear and transparent process on that regard. INP and MIREM have been cooperating actively towards achievement of such objective.

3.1.10.2.2 - Ministry of Finances

This Ministry plays a critical role on the collection of all the taxes and revenues due to the State regarding Oil and Gas exploration and production activities, such as corporate income Tax, Royalty in cash, custom duties and exemption on importation of petroleum exploration equipment, Value added Tax, etc.

To build capacity in understanding the oil and gas exploration and production activities INP involved the National Treasure Authority (ATM) in a training regarding matters related to the fiscal terms applied to the exploration and production of hydrocarbons. INP organized a visit to the Norwegian Tax Authorities with participation of ATM technical to allow them to interact with the Norwegian Tax Authorities to learn on the way this Norwegian organization is structured and how are taxes regarding petroleum production is collected.

3.1.10.2.3 - Ministry of Labor

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The INP have been in cooperation with the Ministry of labor in respect to petroleum related activities in audits that took place towards the Sasol Petroleum International Natural Gas Venture located in Temane where Health, Safety and Environmental aspects were looked trough in a multisectorial audit team. Coordination with the Ministry of labor and INP is also observed concerning the authorization of expatriate experts incoming the country to work at exploration and production installations as the labor law provides for limitation incoming of expatriate labor.

3.1.10.2.4 - Ministry of Environmental Coordination

INP is the responsible institution for the administration of petroleum operations including environmental compliance. As a regulatory body, INP has been in cooperation with MICOA to perform audits on the Central Processing Facilities in Temane, where the natural gas is processed as well as in the auditing of the fields, pipeline from Temane to the border with South Africa.

Recently a specific environmental regulation for the petroleum sector has been approved by the Council of Ministers. The implementation of this legal frame work will require a substantial cooperation with MICOA being the coordinating institution for all environmental issues.

In the planning of petroleum operations by the operating companies, they have to assess different environmental options and INP is responsible for recommending technical options that are environmentally benign with reasonable cost implications. An active dialogue with MICOA in such issues is important.

Most petroleum projects will require an EIA to be carried out. According the new regulations INP will play an active role in assisting MICOA in handling such assessments.

INP will also play an active role in the elaboration of Strategic Environmental Impact Assessments that will be critical for the management of the petroleum resources. The collection and sharing of relevant data is an important area of cooperation.

3.1.10.2.5 - Ministry of Foreign Affairs

Mozambique as a coastal country in accordance to the United Nation Convention on Law of the Sea (UNCLOS) has the right to extend its continental shelf beyond 200 nautical miles. Mozambique started the process of extension of its continental shelf back in 2006 and cooperation with the Ministry of Foreign Affair has been strengthened since then trough the Institute of Maritime and Foreign Affairs (IMAF) with the involvement of INP technical staff at the National Commission on Extension of Continental Shelf and on the Borders Commission.

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INP has been also instrumental on provision of funds (made available trough the Oil for development fund of Norway under the current institutional support for petroleum sector) for the acquisition of crucial geophysical data for the process of extension of the continental shelf.

3.1.10.2.6 - Ministry of Health

The Ministry of Health has been in cooperation with INP trough its participation in multisectorial Health Safety and Environmental audits towards the Pande and Temane natural gas venture.

3.1.10.2.7 - Ministry of Tourism

The Ministry of Tourism have cooperation with INP in the harmonization of EPCC since it is critical to have a balance between the Oil and Gas exploration, development and production activities and the touristic activities some of which are developed offshore, which may have touristic potential or can be in conflict with the tourism activities already established.

The EIA studies will tend to indicate potential impacts over the touristic activities in the exploration and production of petroleum and as such it is of outmost importance the cooperation with the Ministry of Tourism have been so instrumental in the evaluation of potential impacts on the Oil and Gas exploration and production activities.


INP a one stop shop with cooperation agreements with important cooperating institutions Support provided to MIREM in policy development, strategic planning and in enhancing

the level of competence in priority regulatory issues like approving gas transportation tariffs.

Coordination with Ministry of Finance developed to improve and make more efficient the control of tax and royalty payments.

Coordination with the MIREM and Ministry of Finance institution well developed on fiscal system development.

Cooperation with MICOA well developed particularly regarding impact assessments, strategic impact assessments, HS&E audits, database coordination and regulatory issues.

Continued cooperation with Ministry of Foreign Affairs / subordinated units to have the UNCLOS submission for an extended continental shelf approved, and to solve transborder issues coming up

Improved cooperation with Ministry of Fisheries to avoid conflicts between petroleum operations and fisheries.

Improved cooperation with Ministry of Tourism to facilitate a sustainable development of both sectors.

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EP planning established involving a number of regulatory institutions Improved cooperation with ministry of Labor on Working Environment issues, use of

expats, work schedules and work permits


Prepare procedures to turn INP to be one stop shop Continue with the training of the Tax authority staff in petroleum related activities and

involve them in auditing of the metering stations Involve MICOA in EIA, SEIA, and HSE audits, database coordination and development of

regulatory issues Liaise with Ministry of Foreign Affairs in connection to further clarification of the

extension of continental shelf and any upcoming border issues Liaise with the Ministry of fisheries on Petroleum operations issues that can affect

fisheries. Liaise with Ministry of Tourism in on petroleum operations that can impact on tourism

and sustainable development as well as on definition of conservation areas

4. Implementation of the work programme

The responsibility for implementing the tasks contained in the proposed Work Programme falls on the management of INP. The technical capacity created along those years in order to perform the administration and monitoring of the petroleum activities might not cope with the growing volume of activities and the level of expertise involved and in some of the INP duties may requires the involvement of consultants for assistance for possible solution of the demanding activities.

INP will need to enter into an agreement with the Norwegian Petroleum Directorate (NPD) for institutional co-operation in the execution of the activities under the existing Programme mainly programmes that involve issues related to the development of Policy and strategies, Resource assessment, promotion of exploration and production areas, monitoring of petroleum operations, data management, information to the public and institutional development. INP wishes to continue this co-operation agreement with NPD for the proposed extension of the Programme due to its experience and competence that NPD has accumulated in regulating upstream activities. For assistance within health, safety and environmental issues, INP would like to have access to expertise from the Norwegian Petroleum Safety Authority (PSA) under the cooperation agreement with NPD. Any support from the Norwegian Climate and Pollution

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Agency (KLIF) can hopefully also be provided under the cooperation agreement with the NPD to cater for the environmental aspect of petroleum operations mainly emissions resulting from these operations. The Government may also need both technical and legal support to follow up and provide technical information in relation to claim to the UN relative to the delimitation of the maritime areas under its jurisdiction in cooperation with the Institute for Maritime and Boarders (IMAF) that is leading this process.

In many of its tasks INP will also require the services of specialist consultants, and the intention is to secure suitably qualified firms and persons to assist with the development of Petroleum Policies, negotiation support, studies, evaluations, training and institutional development. Specific support in data management will also be needed in the assistance of the Seismic work station. In all cases where specialists from NPD or from consultancy firms are used, the projects should be structured to give the maximum opportunity for training of local staff.

A close co-operation with the Ministry of Energy, with Departments at the Ministry of Mineral Resources, Foreign Affairs, Environment, Tourism, Fisheries, Home Affairs, State Administration and other relevant government organizations will be maintained to enhance the relevance of the programme and co-ordinate NORAD supported activities that can serve several institutions.

5. Monitoring System for the progress of the programme and reporting

For the monitoring of the progress in implementation of the institutional support to the Petroleum sector INP have establish a set of indicator of performance of the progress of the programme. The progress on the outputs and achievements on objectives and goal level will be executed trough the development of an Annual Workprogramme and budget set up by previous biannual planning meetings between INP and NPD, at the beginning of each year and a follow up meeting in the last quarter of the year, where the execution of the programme is checked against the annual work plan and the budget as well the elaboration of the work plan and proposed budget for the forthcoming year. These work Plans and Budgets will be submitted to the local Norwegian Embassy for approval since the Oil for Development Programme is represented by its Embassies in countries where cooperation is in place. The progress of the programme will have to be presented in a written report to be submitted to the Embassy where comparison of the planned activities against the results is described as well as a summary on use of funds budgeted. The funds used for the implementation of the annual work plan will be audited by an independent auditor and submitted for the consideration of the Norwegian Embassy as well and the invoices from the Norwegian partners involved in the Programme will be subject to the auditing of the Norwegian State Auditor. The Annual Meeting may suggest rectifying activities to be performed if the progress of the Programme is not as planned and the efficiency of the programme will also be considered, as well as the analysis on the risks.

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The documentation referred above will have to be delivered to the Norwegian Embassy previous to the annual meeting, which will be the main meeting to address the progress on the implementation of the Programme.

It is expected that the programme will undergo a mid term review by an independent consultant and possibly also a final review at the end of the programme.

6. Request for funds for the extension of the sector agreement (Inputs) As a newly established organization the National Petroleum Institute still needs assistance to enable its establishment and for the execution of its regulatory duties.

Although different schemes for funding of INP activities are provisioned in its statutes, it is early for the generation of such incomes to support INP activities.

The requested funds are meant to facilitate the implementation of the technical aspects mentioned under the Work Programme presented bellow. INP relies mainly on funds from the state budget and from institutional support under the EPCC with the oil companies. However assistance from Norway to continue to develop its institutional competence and capacity is still required to complement the implementation of INP institutional and regulatory duties in a manner that encourages investments by international oil companies in petroleum exploration and production in Mozambique and maximizes the values from this sector for the country. In addition, INP wish to continue to have access to technical and regulatory support from NPD and other selected institutions and consultants in the execution of the activities included in the proposed Sector Programme for 2010-2014, as described in detail in attachment 1 (See table with projected breakdown costs for the support).

The funds requested from Norway for the period 2010-2014 to cover the assistance provided to INP activities under the Sector Programme amounts to NOK 52 million, including NOK 10 million for sector capacity building and education. Including the contingency this programme can go up to NOK 57, 5* Millions

The distribution of these funds over the five years is:

Year 2010 2011 2012 2013 2014 Total

Annual Budget (1000 NOK)*

5 500 12 800 12 500 11 150 10 05 0 52 000

* including NOK 5, 5 mill contingency

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For sector training purposes there will be a need for additional funding of NOK 2,5 mill per year (2011-14) for master-programmes and support to strengthen the capacity and quality of vocational training of relevance for the petroleum sector, in total NOK 10 mill.

7. Risk Factors for the implementation of the programme

7.1-Funding of the programme activities:

The implementation of the programme may face some challenges in view of volatility of concession contracts which can have detrimental effects on availability of funds for INP

The International financial crisis may affect Mozambique and consequently INP funding. The Meticais / US$ / NOK conversion rate may change unfavorable

7.2- Demand for INP regulatory services – work load reducing receiving capacity

Uncertainties resulting from:o Volatility in Oil prices can reduce investor confidenceo Uncertainty regarding future gas prices (Shale gas)o Volatility of economic activity in international markets for Mozambique gas o Prospectivity/New discoverieso Development planso Accidentso Discoveries crossing international borders/Trans-national pipelines

7.3- Uncertainty regarding access to skilled staff /AIDS Car accidents Access to trained people Attitude towards work

7.4– Political Change of Government Political decisions influencing INP responsibilities and scope of work

o Licensing of exploration and production areas Willingness to implement changes in the current legal and regulatory framework

8. Risk mitigation measures

8.1.1 - Funding issues

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As a long run solution the INP need a more stable source of income than the institutional support contributions at the signing of the concession contracts. Either the concessionaires contribute with annual fees under the lifetime of the contracts or the state funding is robust enough to finance the INP operations. INP supervisory activities can also be invoiced to the concessionaires to provide part of the funding.

By maintaining NOK and US$ accounts for expenses which will incur in these currencies the uncertainty in this regard will be reduced.

8.1.2 - Receiving capacity

A strong focus on planning can improve the INP capability to meet the expected work load. It is however planned systematically to expand the technical capacity to have enough people to handle the regulatory work, the management of the OfD programme and training needs. Any excess manpower can always be sent on training programmes if such a situation should occur.

Some unexpected events will always take place, hopefully they are positive like major discoveries! The INP work plans need to single out activities of lower priority which can be put aside if the capacity is more required for other issues.

A well functioning ITC system, good data and work procedures improves capacity.

8.1.3 - Access to trained personnel

INP is still in a growth phase and need a strong focus on recruitment and HR policy. For this reason it is planned to recruit a HR manager. INP will have to recruit technical personnel in excess of what is critically needed to have capacity for training and to meet any loss of critical personnel. Doubling of critical positions is an instrument which will be used. With the growth in the petroleum industry the companies are expected to compete for the best and experienced people and INP will be vulnerable.

Improvement of working conditions, career plans, well serving ICT systems, etc are good instruments in keeping the turnover at a low level and at keeping the work ethics at a high level.

8.1.4 - Political uncertainty

One of the most time consuming activities for INP is the concession rounds or any direct negotiations. It is very important to INP that licensing takes place in a planned manner following the licensing strategy.

The dialogue with the Minister is extremely important to relay to her the importance of certain issues, like the optimization of the legal system. Before significant work in such matters is

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undertaken, the likelihood of the parliament having capacity to handle such issues should be assessed.

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