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Saipem Says Mozambique LNG Project Can Only Be Resumed in 2023. Construction Contract Will Be Revised

Saipem Says Mozambique LNG Project Can Only Be Resumed in 2023. Construction Contract Will Be Revised

Italian oil services company, Saipem, expects that the $23 billion Mozambique LNG project, the force majeure declaration issued in April by oil and gas giant, TotalEnergies, will not be lifted until 2023 at the earliest.

Still, the company says the contract to supply and build much of the Mozambique LNG project will be renewed with a view to fitting into the current environment.

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“TotalEnergies will not restart work on its LNG project in Mozambique this year and, therefore, its contract with the consortium in charge of building the liquefaction components will be revised,” reiterates Alessandro Puliti, chief operating officer of the Italian company Saipem quoted by the portal “Upstream Online”.

The company leads, as it is known, the joint venture, along with the engineering and construction solutions provider, McDermott International, and the global engineering company, Chiyoda Corporation, a joint presence that will ensure the engineering, procurement and construction of much of the $8 billion Mozambique LNG project in June 2019, with Saipem contributing about $6 billion.

The $20 billion project remains under force majeure, and Saipem’s chief operating officer, stressed to analysts that: “The project is still on hold and we do not expect any restart of operations within 2022.”

Meanwhile, asked by an analyst whether the original terms and conditions of the 2019 procurement and construction contract – much of it priced in 2018 – would remain in place when work was restarted, Puliti said that would not be the case.

“Clearly, we are in a different world today than 2018 and 2019,” Puliti said, highlighting issues related to Covid-19 and raw material costs, even before the war in Ukraine.

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Puliti further explained that, there being negotiations on legacy contracts that were awarded before Covid, “most customers” are willing to accommodate rising costs and believes the same may be true with the Mozambique LNG project deal.

” When restarting operations in Mozambique, they have to be (carried out under) different terms and conditions, because what was agreed at the beginning of the project is clearly no longer sustainable. The full restart of the project will definitely be on a different (contractual) basis, negotiated with the customer,” he points out.

However, according to the “Upstream Online” portal, assuming work is restarted on Mozambique LNG next year, gas exports should begin in 2027 or 2028 from a facility with a capacity of 12.88 million tons per year.

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