TotalEnergies to restart Mozambique LNG operations in 2022

French oil and gas major TotalEnergies is expected to resume work on its on-shore liquified natural gas (LNG) facility in Mozambique by the end of 2022. CEO Patrick Pouyanne told reporters during a visit to Mozambique in January that his ‘objective’ was to restart the facility in 2022. The US$20bn LNG plant, located in the restive Cabo Delgado province was shuttered in April 2021 after armed Islamists took over the neighbouring town of Palma. The March 2021 attack prompted Mozambique to accept foreign troops from Rwanda and a bloc of southern African nations to help quell the insurgency.

The reopening of the project is a signal that security in the province is improving. The resumption of operations will also be a relief for other partners in the project which include Mozambique’s National Hydrocarbon Company (ENH), Japan’s Mitsui and Co, Thailand’s PTT Exploration and Production, as well as the three state-owned Indian firms – Bharat Petroleum, ONGC Videsh, and Oil India Limited.

A multinational force of regional African countries has pushed Islamist militants back from strategic LNG areas in recent months. Nevertheless TotalEnergies has made it clear that it would only resume operations once it believed that the security situation has fully stabilised. While the intervention of regional troops has helped Mozambique regain lost ground, sporadic clashes with insurgents continue. Towns that were abandoned by residents last year have yet to see their return.

Pouyanne’s announcement comes not long after the South Korean-made Coral Sul Floating LNG (FLNG) plant arrived in Mozambique’s coastal waters early January. The FLNG platform is being deployed by a consortium led by Italy’s ENI. The arrival of the Coral Sul FLNG plant and the likely resumption of TotalEnergies operations suggest that Mozambique will soon be producing LNG for export. At present, the ENI-led consortium is hoping to be operational by the end of 2022, and TotalEnergies could begin exporting LNG as early as 2024.

The two projects could turn Mozambique into one of the largest LNG exporters in the world and may prompt further investment and exploration of the East African coastline.

 Mozambique is heavily reliant on the potential revenue from these developments to fund the government’s ambitions and begin paying off the country’s substantial national debt, which is currently equal to around 128% of GDP. The discovery of offshore natural gas and the resumption of the Cabo Delgado project, however, comes at a time when pressure is mounting across the world to move away from fossil fuels. This could potentially impact further investments in oil and gas. In December 2021, environmentalist organisation Friends of the Earth filed a legal challenge in the United Kingdom seeking to block the British government’s plans to provide US$1.15bn in financing towards for the development of Mozambique’s LNG sector. The longer Mozambique takes to develop its resource reserves the more it risks missing out on the recent commodity boom.

 

References

‘TotalEnergies aims to restart $20 billion Mozambique LNG project in 2022’, Reuters, 1 February 2022

‘TotalEnergies to resume Mozambique LNG project in 2022’, Offshore Energy, 1 February 2022

‘MoU between Mozambican government and TotalEnergies’, Club of Mozambique, 1 February 2022 

‘Friends of the Earth sues Britain over Mozambique LNG project’, Reuters, 8 December 2021

‘Total declares Force Majeure on Mozambique LNG project’, TotalEnergies, 26 April 2021