Petroleum Policy

3. Scope of policy framework

The policy framework would also usually have the objective of ensuring rapid exploration, efficient development of resources, maximum recovery, environmental protection and access to information. In addition, the policy framework will identify which kind of legal approach will be adopted, what subjects are negotiable and determine the type of international petroleum agreements that suit the host state most (although that can change over time). It is also important for the framework to cover:

  • The role of NOCs

  • Rates of production

  • Health and safety issues

  • Efficient management of revenues

  • Methods of capacity building and training in the host state

However, there are examples of countries which have preferred not to establish a strategic policy framework, and instead have directly initiated contract negotiations, often due to time concerns. Assuming that significant geological data is available and investor interest is high, an “open door” or “first come first served” approach is not recommended since it fails to lever the benefits of competition between potential licensees seeking contract award, competition that should strengthen the bargaining power of the licensing authority and, all other things being equal, result in a more advantageous deal for the country government.

There will also be differences between gas and oil policy, because the latter has a major external dimension in that it is traded globally while gas markets are predominantly regional, particularly for land-locked states. In Mozambique’s case, the preparations for a legal framework and institution-building were sound in the late 1990s but had to be overhauled when large deposits of gas were found instead of the expected oil, requiring a new petroleum law.