Total has declared a force majeure on its multibillion-dollar LNG development in Mozambique after an escalation in attacks by Islamist insurgents forced Africa’s largest private investment to be silenced.
The French energy major said on Monday she had activated the contractual exit “in view of the evolving security situation” in Mozambique’s northernmost region, Cabo Delgado, where insurgents ravaged last month a city adjacent to the $ 20 billion project.
The Palma attack killed dozens of people, including foreign workers, and left thousands homeless, prompting Total to withdraw all staff from the neighboring Afungi peninsula project.
The discoveries of vast offshore gas reserves over the past decade have promised to transform the economy of one of the poorest countries in the world.
But the development of LNG has been overshadowed by the rise in the insurgency threat since 2017, especially last year’s attacks that left President Filipe Nyusi’s security forces on their feet.
Total’s declaration of force majeure will increase pressure on the Nyusi government to reverse the war.
“A case of force majeure has been declared because Total is unable to fulfill its obligations due to the serious deterioration of the security situation in Cabo Delgado, an issue totally beyond Total’s control”, declared the society.
Total recently signed nearly $ 15 billion in loans attached to the LNG project before the Palma attack, which went well in a 25 km security cordon it had requested from the government.
The company has not given a date for the resumption of operations, which analysts say will likely depend on proof that government forces are better trained and equipped to fight insurgents.
Mozambique’s national oil and gas regulator said on Monday that Total would assess the impact of the suspension on the project schedule alongside the government.
Total previously reported that the Mozambique project would produce its first gas in 2024. But even before the Palma attack, exports were unlikely to start until the second half of 2025, analysts at NKC African Economics said.
Last year, the LNG project, which aims to produce 12.9 million tonnes per year, was also hit by shutdowns caused by a coronavirus outbreak and a previous insurgency threat near the site.
“While Total’s latest withdrawal may be long, we believe it is unlikely to be permanent,” added NKC analysts. But ‘the start date later. . . not only will delay the economic benefits arising from these exports, but will also reduce government revenues ”throughout the life of the project.
Total holds a 26.5% stake in the Mozambique LNG project alongside other global investors and ENH, Mozambique’s national oil and gas company.
Newsletter twice a week
Energy is the world’s essential business and Energy Source is its newsletter. Every Tuesday and Thursday, straight to your inbox, Energy Source brings you essential news, cutting-edge analysis and insider information. register here.