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INP, Bayphase audit cost recoverable at Areas 1, 4

Around $33 million of spending in Mozambique’s two LNG concessions is unrecoverable, the Instituto Nacional do Petróleo (INP) has said, following an audit.



The agency carried out work to assess spending on Areas 1 and 4 in northern Mozambique, covering 2015, 2016 and 2017. The UK’s Bayphase assisted INP in this work.

The investigation found that concessionaires had declared $2 billion of spending during the period on the two licences. Of this amount, 2% was ineligible for recovery.

This amount of around $40 million is unrecoverable because of various filing issues. These include companies not abiding by accounting and financial procedures, in addition to not providing documents on the costs.

INP and Bayphase are working on the Coral Sul floating LNG (FLNG) audit for 2017. Eni took final investment decision (FID) on Coral Sul FLNG in 2017.

INP said it would begin the audit process on Areas 1 and 4 in May, for the years of 2018, 2019 and 2020. It is in the process of finding a consultant to assist in this work.

The agency also said it had audited Sasol’s costs at the PSA area for 2017. It will publish results from this in the next few days.

INP is in the process of evaluating the company’s work in 2018. A final report is due later this year.

Under Mozambique’s Concession Contract for the Exploration and Production of Petroleum (CCPP), concessionaires are responsible for all costs around development. Companies can recover costs from hydrocarbons produced.

Under the CCPP, concessionaires are required to maintain accurate records of spending. INP then audits these to determine how much cash the companies can claim when producing.

Challenges

The summary audits did report some difficulties in accessing the audits. On Area 1, for instance, the report complained of delays in securing the information, while data was incomplete or unnecessary.

The results was an “immense amount of our time and resources”, the Bayphase report said. These problems could have been avoided if INP and Total had collaborated on an “acceptable system” and improve processes for future audits.

Bayphase made similar complaints about Mozambique Rovuma Venture (MRV), on Area 4.

The consultants also said they had only checked the documents and transactions. They had not determined whether the costs were fair and reasonable.

INP should consider this in future, Bayphase said.



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