Categories: Gas

by Gabriel Klaasen


Categories: Gas

by Gabriel Klaasen


French energy giant Total SE suspended its $20 billion liquefied natural gas project in Mozambique indefinitely due to an escalation of violence in the area, including a March attack by Islamic State-linked militants.

The decision is a blow to Total, which bought an operating stake in the project for $3.9 billion in 2019, hoping to start exporting the super-chilled fuel by the end of 2024. The first phase of the project is designed to produce over 13 million tons of LNG a year.

Total was resuming work on the project last month, after it was stalled since January because of security threats, as more than 100 rebels raided the town of Palma nearby the site. Dozens of people died, millions of dollars of property was damaged and the company immediately froze plans to resume the project.

The worsening security situation is also a major setback for Mozambique, which is facing a rising death toll with hundreds of thousands of people displaced. Exports of the fuel could help transform the economy of one of the world’s poorest nations.

The fresh violence in the north of the Cabo Delgado province “leads Total, as operator of Mozambique LNG project, to declare force majeure,” the company said in a statement on Monday. That’s “the only way to best protect the project interest, until work can resume.” Project finance remains in effect and “Mozambique LNG has agreed with lenders to temporarily pause the debt drawdown,” Total said.

The force majeure gives Total “a lot of breathing room” with the construction companies and buyers of the gas, while increasing pressure on the Mozambican government to resolve the security situation, said Darias Jonker, Africa director at Eurasia Group. That will take community engagement as well as intelligence resources to remove the insurgency, he said. “Overall the downward trajectory of the situation continues.”

Force majeure is a provision that allows parties to suspend or end contracts because of events that are beyond their control, such as wars or natural disasters.

Contracts Suspended

Contracts for site activities have been temporarily suspended, including that of the CCS JV, a joint venture between McDermott International Ltd., Saipem SpA and Chiyoda Corp., Carlos Zacarias, chairman of Mozambique’s National Petroleum Institute, said at a press conference in Maputo. Some of the agreements could be terminated depending on how long work is delayed.

The project had gained momentum as Total acquired the operator stake from Anadarko Petroleum Corp. two years ago. The company was making progress on early construction, including an airport along with accommodations for workers. Simultaneously an insurgency was rising in Cabo Delgado province.

The Mozambican state had been hoping to reap nearly $100 billion in revenue over 25 years from LNG projects. Earlier delays have already caused the International Monetary Fund to scale back its economic growth forecasts for the nation.

Yields on Mozambique’s $900 million of Eurobonds due 2031 rose five basis points on Monday to 10.47%, widening the country’s sovereign risk premium over U.S. Treasuries by seven basis points.

Production Start

Mozambique LNG had completed nearly $16 billion in funding by July last year, involving several banks, despite a slowdown in energy investment as the coronavirus hammered the global economy.

Studies are being undertaken in order to determine a revised timeline for gas production, Zacarias said.

The violence has left at least 2,780 people dead, according to the Cabo Ligado website, which tracks the conflict. It’s also displaced more than 700,000 people. While the government has pledged to restore peace, attacks have grown closer to the site, resulting in the evacuation of workers.


Subscribe to our free newsletter.

Business Report 1 July 2012. Optimal Energy chief executive Kobus Meiring is a disappointed man. The company is the developer of South Africa’s electric car but it officially closed on Friday with the loss of about 60 jobs. This follows its failure to get further funding from the government and the Industrial Development Corporation (IDC)...

Related Posts

  • By Susan Comrie for amaBhungane 19 Jul 2022 original article here Amidst an unprecedented load shedding crisis, the Central Energy Fund is pushing ahead with Energy Minister Gwede Mantashe’s plan to build a ‘gas bridge’ to Mozambique, while Eskom calls for up to 6,000 megawatts of new gas-fired power to urgently be added to the grid. […]

  • by Fiona Harvey 10 May 2022 original article here Countries should Analysis says countries can save money by switching from coal straight to renewable energies An interconnection gas hub in Baumgarten an der March, Austria. High prices for gas have reversed the logic of using it as a ‘transition’ fuel. Photograph: Joe Klamar/AFP/Getty   move from […]

  • By Tony Carnie 30 Mar 2022 original article here ‘Energy security should be based on science, not narrow, short-sighted political and vested interests. History will judge the current South African government harshly if it fails to act decisively now for the sake of its people and the greater good of the planet.’ Three senior local scientists […]

  • 24.03.2022 by Lameez Omarjee original article here   Energy Minister Gwede Mantashe is “enthused” by the prospect of gas discoveries, as it will attract foreign investment. The gas industry, which is currently being developed, will support the country’s energy transition in a big way, he said. Domestic gas resources will eliminate the need for imports, […]