TotalEnergies chief executive Patrick Pouyanne has outlined the speed at which the French giant could reboot the work for its $20 billion Mozambique LNG project in Cabo Delgado that, as we know, was halted two years ago after Islamist militants attacked nearby towns and accommodation facilities.
Adressing to analysts, Pouyanné reiterated his position that for work to resume at the Afungi site near Palma there must be adequate security and that people who fled the insurgents’ attacks must return to Cabo Delgado province and “have a normal life.”
“We will restart all activity the day that I will myself be able to visit Afungi, Palma and Mocimboa da Praia. Because if my security people tell me not to go, I will not send any of my people or contractors to face a difficult situation,” he said.
While the situation on the ground has improved after Mozambique’s armed forces were reinforced by troops from Rwanda and the Southern African Development Community, Pouyanne said: “It’s not yet fully recovered.”
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Mozambique’s government has said its objective is to ensure security by next month, but Pouyanne stressed: “We don’t want to restart our activity surrounded by refugee camps… we want the situation to be stable.
“Some of my senior (staff) went there and so I’ve got some reports, but it’s a question of patience. Once we consider the situation is really under control… we’ll be able to remobilise (within) more or less six months.”
TotalEnergies is looking at avenues to try to expand its LNG production, while also replacing the potential loss of exports from the Yamal LNG plant in Russia and the future possibility of lost LNG sales from Arctic LNG 2.
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While the LNG market is forecast to remain strong for the years ahead, Pouyanne expressed concern that continued high prices — exceeding $20 per million British thermal units — could result in demand destruction as countries look to cheaper energy substitutes such as coal and more renewables.
“We must be careful, because I see quite a big risk of demand destruction, in particular on the Asian side,” he said, pointing out that demand from China fell by more than 10% in the first quarter of 2022 and that this is “probably linked to high prices”.
In the longer term, high LNG prices will “not only destroy demand in Asia but will slow down, in my view, the use of gas in Europe” because customers “will not accept” a price of $20 per million Btu, Pouyanne said.
“I’m afraid that some Asian countries will go back to coal quite easily, which is not good for climate, but that’s what will happen,” he added.
Internally, he said the company’s project teams are using an $8 gas price to underpin decisions to develop new resources, highlighting the 1 trillion cubic foot Quad 9 project in the UK North Sea as a case in point and which he wants brought on stream.
“The priority is to maintain demand,” remarked Pouyanne, which represents “an opportunity for us to sign long-term contracts at acceptable prices”, while also helping to launch additional LNG projects.