- Security threat by insurgency shut project in early 2021
- US has provided biggest portion of $16 billion in financing
TotalEnergies SE’s potential plan to restart its liquefied natural gas project in Mozambique risks sending a $4.7 billion loan agreement with the US into review, creating a new obstacle for a project that’s struggled to get off the ground.
The U.S. Export-Import Bank, which has committed to the largest share of financing for the development of Mozambique LNG, would send the loan into review if the insurgency-plagued project were to be restarted. “If the project were to resume, any further action on financing for this transaction would require consideration and careful review by EXIM,” a senior official at the bank said in a reply to questions by Bloomberg, adding no disbursements have been made to date.
Any change in funding arrangements would create a new obstacle to TotalEnergies getting the gas project back off the ground, after it was halted for more than two years following terror attacks by Islamic State-linked rebels. TotalEnergies, the operator, has been weighing a return to the site to complete the project if the security situation allows.
A spokeswoman for TotalEnergies declined to comment.
Mozambique LNG, the biggest foreign direct investment in Africa to date, was unsuccessfully challenged earlier this year in a suit claiming the financing by the UK’s government was contrary to commitments under the Paris Agreement. TotalEnergies has said Mozambique LNG could only start exports of the fuel by 2027 at the earliest.
Exim’s board approved the loan in May 2020, during Donald Trump’s presidency, saying that it would support 68 US suppliers and 16,700 American jobs through involvement in the onshore plant as well as offshore production. TotalEnergies’ project completed as much as $16 billion in funding involving a score of banks.
Mozambique LNG was suspended the following year after ongoing security threats including an attack involving more than 100 rebels that raided the town of Palma nearby the site and killed dozens of people.
Total’s Chief Executive Officer Patrick Pouyanne visited the area in February and an independent report was commissioned. Jean-Christophe Rufin, a French doctor who’s been involved in humanitarian aid and diplomacy, was instructed to put together the study on the situation in the Cabo Delgado province, where the project is located.
A resumption of the project, which has been estimated to require investment of at least $20 billion, would come at a critical time for Mozambique, whose entire annual gross domestic product is below that amount. TotalEnergies owns 26.5% of the venture.
The company also plans on keeping costs from escalating. While “contractors are impatient,” the consortium that owns the project “will take as long as it takes,” a TotalEnergies spokesperson said in a May 16 reply to questions.