Mozambique and TotalEnergies launch $20 billion LNG project

TotalEnergies and Mozambique agreed to restart construction of the French energy giant's $20 billion "liquefied natural gas" project in the country on Thursday, even though they are still negotiating over the additional costs associated with delays. Construction on the project was stopped in 2021 after a series of jihadist attacks in Cabo Delgado in northern Mozambique. TotalEnergies has added equity to its partners' projects after some investors pulled out. It announced late last year that it was ready for work to resume. TotalEnergies CEO Patrick Pouyanne told a crowd in Afungi near the project in Mozambique’s northeast that "you will see a huge ramp-up of activity in the coming months." A first offshore vessel had already been mobilized to start installing offshore infrastructure. "We are working hard to achieve our goal of delivering LNG by 2029, on a $20 billion budget. There is a lot to do," said Pouyanne. TotalEnergies, project operator and major shareholder, announced that it would contribute 200 million meticals (3.2 million dollars) to assist Mozambique in dealing with the recent floods.

"Within 12-18 months, we'll be back here to witness the construction of Rovuma LNG," stated Mozambican president Daniel Chapo. He was referring to Exxon-led project which shares a few facilities with Total.

The cost of security has improved, and negotiations are ongoing.

Cabo Delgado has seen an improvement in security, especially with the deployment by Rwandan soldiers to the Afungi site. Though weakened, the Islamist insurgency continues to simmer. The project, which has the capacity to produce 13,000,000 metric tons per year of LNG, is expected to transform Mozambique's economy once it goes online. The project has faced a number of challenges, including those related to finance, security and human rights. This has scared some investors.

TotalEnergies wrote Chapo in October to estimate that the costs of the project had risen by $4.5billion during the years the project was on hold. The consortium was seeking a 10-year extension of the production and development period as partial compensation. On Thursday, President Chapo stated that the two parties would negotiate in order to reach an agreement on revised costs after an audit was completed. It is important to note that the negotiations must not hinder the project. Chapo stated that restart is a "reality". Pouyanne stated that "these small issues will be resolved according to our contracts and the law." Total has already received a license extension automatically to cover the five-year delay in construction.

Taxes and profits to boost government Coffers

Pouyanne stated that Total had already trained 4,500 workers for the project. 1,500 of these workers are being trained near the site in Palma in electrical work, carpentry and other trades required to build the plant.

Chapo stated that the project could generate up to $35 billion in taxes, oil revenues, and other contributions over its lifetime.

TotalEnergies holds a stake of 26.5% in the Mozambique LNG Consortium. Mitsui, a Japanese company, owns 20% of the consortium, followed by ENH, which holds 15%, Bharat Oil, Oil India and ONGC Videsh, each with 10%. Thailand's PTTEP owns the remaining 8.5%.

(source: Reuters)