Mozambique: Sasol Denies Cost Inflation Allegations


Maputo — The South African petrochemical giant Sasol has denied allegations that it has vastly inflated the recoverable costs in its oil and gas operations in Mozambique.

The preliminary results from an audit ordered by the Mozambican government showed that Sasol declared recoverable costs of 148.7 million dollars for its operations in the southern province of Inhambane in the 2017 financial year. But the audit found that, of this sum, 50.5 million dollars was not eligible for cost recovery.

It was the same story for 2018: Sasol claimed recoverable costs of 114.4 million dollars, but the government auditors calculated that 49.3 million dollars of this sum was not eligible. So taking the two years together, Sasol had overstated its recoverable costs by 99.8 million dollars, which has significant implications for the amount of tax it should be paying to the Mozambican state, since recoverable costs are deducted from tax payments.

A Sasol press release, dated Tuesday, did not contest the government figures, but said that the audit is “ongoing”.

“Preliminary reports were issued in order to obtain initial feedback and Sasol has submitted additional information in order to explain its contrary view of the preliminary findings. This information is still being analysed by the auditing entity”, said Sasol.

“Recoverable Contract Costs refer to Exploration Costs, Development and Production Capital Expenditure, Operating Costs, Service Costs and General and Administrative Expenses which are used in the calculation of petroleum profit sharing between the shareholders as determined in the Production Sharing Agreement (PSA)”, the release continued. “As the operator of the PSA, Sasol ensures that all costs are correctly accounted for, under the terms of the agreement between the shareholders and the Mozambican government”.

These costs are subject to audit by the INP (National Petroleum Institute), the regulator, as per the PSA license”, it added. “Once the audit is complete, INP will disclose a full and complete audit report”

Sasol protests that it is “an ethical corporate citizen and we are committed to continue developing Mozambican hydrocarbon resources for the benefit of the country, its people and all stakeholders”.



Source: Agencia de Informacao de Mocambique