French oil company TotalEnergies plans to restart construction work on the Area 1 liquefied natural gas (LNG) plant in the Rovuma basin later this year, the company’s CEO announced at a conference with analysts, considering that “the situation has clearly improved”.
According to the Bloomberg financial news agency, Patrick Pouyanné told analysts that he considered that the insecurity situation that led to the suspension of work in 2021 “has clearly improved”, which allows work to resume on the Afungi peninsula, in Cabo Delgado province, later this year.
With the new timetable now on the table, the start of gas production on a 20 billion dollar project could happen in 2028, and gives new impetus to the increase in interest payments on the 900 billion dollar debt, whose interest will rise from 5% to 9% from March next year.
“The resumption of the LNG projects is crucial for the bonds,” commented the head of investments at Capitulum Asset Management, Lutz Roehmeyer, a Berlin-based fund manager, adding that “without the resumption of construction, a new debt restructuring can only be avoided if the capital markets open up to Africa again.”
The news of the resumption of work comes the week after financial information agency Moody’s downgraded the outlook for the economy from positive to stable, keeping the rating eight notches below investment grade.
Even with a financial support programme from the International Monetary Fund (IMF), Mozambique’s finances are still under pressure, with delays in paying off domestic debt and difficulties in paying civil servants.
Mozambique has three development projects approved to exploit the natural gas reserves in the Rovuma basin, which are classified as among the largest in the world and are located off the coast of Cabo Delgado province.
Two of these projects are larger and involve channelling the gas from the seabed to land, cooling it in a plant and then exporting it by sea in a liquid state.
One is led by TotalEnergies (Area 1 consortium) and work progressed until it was suspended indefinitely after the armed attack on Palma in March 2021, when the French energy company declared that it would only resume work when the area was safe. The other is the still unannounced investment led by ExxonMobil and Eni (Area 4 consortium).
A third completed, smaller project also belongs to the Area 4 consortium and consists of a floating platform for capturing and processing gas for export, directly at sea, which started up in November 2022.
