Portuguese Energy Company, Galp Energia, has begun steps to resolve its ongoing tax dispute of about $300 million with Mozambique through an International Arbitration Tribunal.
The case centres on the amount of capital gains tax payable from the sale of Galp’s stake in a gas project in Mozambique’s Rovuma Basin.
In a statement to the Portuguese Securities Market Commission (CMVM) on Tuesday, Galp said it had notified the Mozambican State about its intention to initiate arbitration.
The Company explained that this move was to assess the conduct of the Mozambican Authorities over the Capital Gains Tax linked to the sale of its interests in Area 4.
According to Galp, “this notification marks the first step towards initiating the arbitration process,” adding that it has also sent a formal letter to Mozambique’s President, Daniel Chapo, setting a time frame for both parties to reach an agreement.
Dispute over Area 4 sale
The disagreement stems from Galp’s exit from the consortium operating Area 4 of the Rovuma Basin, which it sold in March to XRG, a subsidiary of the Abu Dhabi National Oil Company (ADNOC), for $1.05 billion.
Although Galp did not disclose the disputed amount in its statement, Mozambique’s Tax Authority (AT) earlier assessed the company’s tax liability at about $300 million. However, Galp maintained that its total obligation was closer to $8 million.
Galp stated that it had made efforts to resolve the issue through dialogue, but it was compelled to turn to international arbitration after negotiations failed.
“Galp has shown full willingness to comply with all tax obligations and to find a path to mutual understanding,” the company said.
“Resorting to legal mechanisms, both national and international, is a step the company is compelled to take, although it has always sought to avoid it, preferring a constructive dialogue with the Mozambican Authorities in order to clarify the matter.”
Area 4, located offshore in Mozambique’s Rovuma Basin, is operated by Mozambique Rovuma Venture (MRV).
The venture includes Eni (50%), CNPC (20%), KOGAS (10%), ENH (10%), and ADNOC’s XRG (10%).
Mozambique’s LNG ambitions
Area 4 hosts major gas developments, including the Coral South Floating Liquefied Natural Gas (FLNG) facility, which is already operational. It also includes the upcoming Coral North FLNG development and the planned Rovuma LNG onshore project.
Last week, Eni and its partners signed the final investment decision (FID) with Mozambique for the Coral Norte project valued at $7.2 billion.
The new FLNG platform will expand the country’s gas output and is expected to boost its foreign revenue.
Mozambique’s government said it expects to earn about $23 billion over 30 years from Coral Norte, reflecting its growing reliance on natural gas exports to drive economic recovery.
The ongoing arbitration between Galp and the Mozambican State adds a new layer to the complex relations between foreign investors and Mozambique’s fiscal authorities, as the country continues to position itself as a key global player in Liquefied Natural Gas production.
