Mozambique: Government Tightens Control Over LNG While Keeping Investor Protections

What happened: Mozambique approved a new petroleum law that expands state participation in hydrocarbons as the country prepares for large-scale LNG development.

Why it matters: The legislation nonetheless preserves key investor protections, including international arbitration.

What happens next: While existing contractual protections remain intact, investors pursuing new LNG projects, expansions and acquisitions should expect more emphasis on domestic benefits than has historically been the case.

Approved on 11 May, Mozambique's petroleum law forms part of a broader effort by President Daniel Chapo’s administration to reshape how the country manages its natural resources as major LNG developments move closer to production. Viewed alongside the new local content law and revised mining law, it reflects a growing determination within the government to secure a larger role for the state and ensure that Mozambique's natural resource wealth generates more visible domestic benefits.

What Changed

One of the most significant updates is the expansion of the state's participation rights in petroleum operations. It establishes a minimum stake of 15% (up from 10%) for the state hydrocarbons company, ENH. The law establishes a mechanism for the state to acquire additional interests in petroleum projects, subject to future regulations yet to be defined.

The legislation also strengthens domestic market obligations. Most notably, it requires a minimum of 25% of petroleum and gas production to be allocated to the domestic market, including LNG, while 100% of condensate production must be directed toward domestic industrialization projects.

The bill places greater emphasis on Mozambican participation in the hydrocarbons sector through local employment, procurement and ownership. Authorities may reserve selected petroleum activities for national companies, while local content considerations receive greater weight during licensing processes.

Together with the recently approved local content law, these provisions further increase the government's influence over how future projects are structured and the distribution of their benefits.

Why Now

Even though Mozambique's major onshore LNG projects already include mechanisms to ringfence portions of future gas revenues for development, the government is still under pressure to convince voters that the country's natural resource wealth will not simply enrich the domestic political elite and foreign investors. Expanding state participation in petroleum projects, therefore, serves not only a commercial purpose but also a political one.

This concern is particularly acute in Cabo Delgado province, where the country's largest gas projects are located. Despite vast resource wealth, the northern province continues to suffer insecurity and poverty; public frustration is growing over the perceived disconnect between mega-project investment and local living standards.

The government increasingly recognizes that LNG development could become a major political flashpoint, especially by the 2029 general election, at which point onshore LNG projects should be in their final stages before coming online at the start of the next decade. The legislation aims to demonstrate that the country’s LNG wealth can generate more visible benefits for Mozambicans.

The October 2025 negotiations surrounding the Coral Norte project illustrate this broader trend. During last-minute discussions over the project's development framework, the government secured the right to market 25% of total production.

While Mozambique is unlikely to commercialize these volumes independently, the concession nevertheless represented an important symbolic victory. It reinforced the government's claim that the state is playing a more active role in the commercialization of LNG and securing a larger share of its benefits.

What It Means

Despite these changes, the bill stops short of fundamentally rewriting Mozambique's investment framework. Existing contractual guarantees remain intact and international arbitration mechanisms are recognized. The result is a framework that increases state influence over the sector without significantly weakening the protections relied upon by foreign investors.

Indeed, compared with the recently revised mining law, the petroleum legislation is considerably more restrained. While the mining law has injected uncertainty around the state's future ability to revisit contractual arrangements, the petroleum law is primarily focused on increasing state participation within the existing investment framework.

Nonetheless, the legislation gives the government a stronger platform from which to influence the development of Mozambique's LNG sector. It ultimately increases the state's ability to shape how projects are structured, how benefits are distributed and how foreign investors engage with the domestic economy — all of which create new layers of compliance for investors. The growing importance of ENH also elevates the influence of its recently appointed Chairman and CEO Rudêncio Morais.

What To Expect

Existing investors will unlikely see contractual arrangements revisited. However, those seeking to expand operations, develop new project phases, acquire additional interests or negotiate amendments to existing arrangements will increasingly encounter a state with stronger participation rights and greater leverage as the government gradually implements the legislation over the next three years.

The same is true for new entrants. Such investors should also expect greater compliance obligations linked to domestic market requirements, local participation and broader development objectives.

The practical impact of the legislation will not be immediate, but as implementing regulations are adopted and enforcement practices become clearer, staying abreast of regulatory developments will become increasingly important.

Governance risks will also increase. As with the recently approved local content law, greater emphasis on domestic participation creates additional opportunities for PEPs and businesses to insert themselves into procurement chains and partnership structures. Enhanced due diligence around local partners, beneficial ownership structures and politically exposed persons will therefore become essential.