Mozambique: New Local Content Law for the Petroleum Industry

The NLCL applies to:

• Holders of petroleum exploration and production rights;
• Concessionaires;
• Third parties carrying out petroleum operations; and
• Special Purpose Entities established (directly or indirectly) by concessionaires.

[jointly, the “Targeted Entities”]

Any entity entering into contracts with the Targeted Entities is also subject to the NLCL .

Entities subject to the NLCL must ensure, through contractual mechanisms, that their subcontractors comply with its provisions, failure of which will result in joint and several liability.

Subcontracting arrangements conducted through Private Employment Agencies are excluded from the scope of application of the NLCL.

The NLCL is built around five overarching principles:

• Preservation of the national interest;
• Capacity building and integration of Mozambican businesses;
• Hiring of national labour and transfer of knowledge and technology;
• Encouraging business partnerships;
• Transparency in the procurement of goods and services.

With the enactment of the NLCL, the Autoridade de Conteúdo Local (Local Content Authority) [the “LCA”] is established.

Enjoying from administrative, financial, and economic autonomy, the LCA is due to operate under the supervision of Ministry of Mineral Resources and Energy and its key functions are expected to include:

• Regulating, monitoring and evaluating Local Content Development;
• Coordinating and supervising the implementation of Local Content obligations, including approval of Procurement Plans and Human Resources Development Plans, by Targeted Entities;
• Sanctioning non-compliance with the NLCL;
• Promoting participation of Mozambican businesses in the petroleum value chain;
• Accrediting Local Content certifiers;
• Maintaining an up-to-date supplier register;
• Publishing approved procurement plans and certified national supplier lists on a public portal.

The Council of Ministers is still due to approve the LCA’s statute and operating rules within 90 days of publication of the NLCL (i.e., by September 2026).

The procurement of good and services within the oil & gas sector is due to be referred to one of the following regimes: 

(a)           Preference Regime

In the hiring of good and services, Targeted Entitiesmust give preference to Mozambican individuals and companies, and particularly to those with higher Mozambican shareholdings, greater use of national production inputs, and a larger share of Mozambican payroll.

The preference applies even where the national supplier's price (including taxes) is up to 20% higher than the lowest comparable price from a qualified foreign supplier.

Where goods or services cannot be sourced domestically, importation is permitted, provided that evidence of unavailability is disclosed to LCA and measures to promote future national integration are considered. Such measures may include, for example, plans for the transfer of know-how, the establishment of partnerships with local entities, capacity building initiatives, and the development of local entrepreneurs.

(b)           Exclusivity Regime

Certain goods and services must be procured exclusively by Targeted Entities within Mozambique where they meet all of the following thresholds:

• Produced using at least 80% national production inputs;
• Produced by Mozambican companies with a minimum of 20% Mozambican-held share capital;
• Produced by companies whose payroll is at least 50% Mozambican.

The specific goods and services subject to this regime are listed in Annex II to NLCL and are due to be updated by decree of the Council of Ministers. These include, among others: food and beverages, office supplies, locally manufactured building materials, animal feed, agricultural inputs, school materials, wood products, and plastic products.

(c)            Free Market Regime

Applies where neither the Preference nor the Exclusivity requirements are met.

This regime applies in particular to main contracts and those involving technology, patents or special requirements (e.g. infrastructure construction, operation and maintenance), and the contracting entity should, wherever possible, award contracts to companies registered and operating in Mozambique.

Communities’ involvement

The NLCL further provides that:

• 30% of goods under the Exclusivity Regime must come from the province where the project operates.
• 15% of semi-skilled jobs must be reserved for residents of the districts covered by the project.

Targeted Entities must prepare and submit to the LCA an annual Procurement Plan covering goods, services and labour, by 31 December of the preceding year.

The Procurement Plan is due to include, amongst others, (i) projected opportunities and timelines, (ii) detailed budgets per activity, (iii) plans for goods, services and workforce, training and capacity-building programmes, and (iv) planned engagement of financial, legal and accounting advisory services.

Partnerships between national and/or foreign entities are encouraged for the supply of goods and services.

Partnerships composed solely of Mozambican parties enjoy a preference right.

For mixed partnerships, preference is given to those with a higher national shareholding, noting, however, that Mozambican nationals must hold at least 20% of the relevant share capital.

Subcontracting to third parties is permitted, provided the subcontractor meets Local Content requirements and international safety and quality standards.

Full subcontracting is prohibited, except with express authorisation from the LCA upon evidence is provided that national capacity is not available.

Subcontracting requests must be submitted to the Authority at least six months in advance, unless duly justified urgency applies

Targeted Entities must hire Mozambican workers progressively to ensure integration, training and knowledge transfer.

A Human Resources Development Plan must be submitted annually to the Local Content Authority, covering:

• Workforce needs by profile and headcount;
• The integration process for Mozambican employees, including categories and positions;
• Knowledge transfer timelines and content;
• Training programmes aligned with career development plans;
• Plans for placing Mozambicans in project management positions, with performance benchmarks.

All goods and services contracts must contain a Local Content clause.

Procurement must be conducted by public tender as a general rule; direct award is permitted only in exceptional circumstances (sole provider, duly justified urgency, or supplements to an existing contract to avoid service disruption).

(a)       Administrative offences: Includes, failure to procure goods/services with the required Local Content; contract splitting; non-compliance with procurement procedures; omission of the Local Content clause; failure to submit Procurement Plans or reports on time; and any other breach of the law.

(b)       Fine range: Between USD 50,000 and USD 300,000 (converted at the Banco de Moçambique exchange rate on the day), depending on the nature and severity of the offence.

(c)       False reporting fine: Providing false or misleading information attracts fines of 1% to 10% of the relevant contract value.

(d)       Late reporting fine: Failure to submit reports on time is punishable by a USD 150,000 fine.

(e)       Repeat offences: A repeat offence carries double the previously applied penalty.

(f)        Additional sanctions: include, loss of tax benefits, cancellation of concession contracts, bar from participating in future tenders under the Petroleum Law and NLCL, prohibition of activity for six months to two years, suspension of the project's operating authorisation, ban on new concession contracts until outstanding obligations are fulfilled.

Any person or entity may file a complaint with the LCA regarding suspected breaches, provided the complaint is duly substantiated and made in good faith; bad-faith or false complaints also constitute an offence.

Where an entity fails (in whole or in part) to meet minimum Local Content targets, it must submit a Compensatory Measures Plan to the Authority within 30 days, containing at least two of the following: technology and knowledge transfer programmes (minimum 12 months) directed at Mozambican companies or vocational/technical institutions; direct funding of or participation in training and certification programmes for national suppliers, prioritising Mozambican SMEs; creation or strengthening of business partnerships with national entities (minimum 20% Mozambican capital); establishment of technical training centres or business incubators in Mozambique, focused on oil-and-gas competencies; implementation of community socio-economic development projects in operational areas. The LCA must respond within 30 days; silence implies tacit approval.

Execution of compensatory measures does not exempt the entity from sanctions.

Failure to carry out approved compensatory measures constitutes a further offence.

Minimum percentage of local procurement (%) by sector/activity:

• Welding and painting services:  15%
• Drilling services:  30%
• Legal services:  70%
• Accounting services:  60%
• Banking and insurance services:  30%
• Aggregates (sand, stone, gravel):  50%
• Fishery products:  85%
• Timber products :  85%
• Cabotage (cargo transport by vessel):  50%
• Petroleum products:  85%
• Catering services:  80%
• Cleaning services:  80%
• Dredging services:  50%
• Civil construction services:  50%
• Business partnerships (commercial companies):  20%

The Council of Ministers must issue the NLCLs implementing regulations within 90 days of the law's entry into force (i.e., by September 2026).

All statutes contrary to the provisions of the NLCL is revoked.

The NLCL came into force on 3 June 2026.