Page 6 - DMEA Week 17 2021

DMEA COMMENTARY DMEA

Mozambique LNG on hold

Total issues declaration of force majeure, citing
deteriorating security conditions in Cabo Delgado

AFRICA FRANCE’S Total has issued a declaration of Mozambique LNG work schedule.)
force majeure on the Mozambique LNG project, Meanwhile, the problems are not confined to
citing deteriorating security conditions in Cabo the onshore construction site. Carlos Zacarias, Exporting gas by
WHAT: Delgado, Mozambique’s northernmost province. the chairman of Mozambique’s National Petro-
The French major has In doing so, it signals that its attempts to restart leum Institute (known locally as INP), was the late 2024
suspended work at work on the project have come to an end – at quoted by Upstream as saying earlier this week
the site of its onshore least for now. that Total had also stopped work on the upstream target now
complex on the Afungi In a statement dated April 26, the company portion of the project – namely, preparations for appears to be
Peninsula. confirmed that it had withdrawn all project gas production at Golfinho and Atum, two fields
personnel from the site on the Afungi Penin- within the offshore block designated as Area 1. unlikely.
WHY: sula where it is building an onshore complex According to Ian Simm, principal advisor at
Total had hoped to and natural gas liquefaction plant. It expressed the IGM Energy consultancy, delays are proba- Ian Simm
resume work in late “solidarity with the government and people of bly inevitable under current circumstances. “The Principal Advisor
March, but has been Mozambique” and said it hoped that “the actions declaration of force majeure eases the strain on IGM Energy
stymied by a series carried out by the government of Mozambique the Mozambique LNG partners, pausing the
of attacks on local and its regional and international partners will drawdown of debt and freezing contracts for
communities. enable the restoration of security and stability in associated development works. This will be of
Cabo Delgado Province in a sustained manner.” little consolation to contractors, as the partners
WHAT NEXT: Total has not said when it might resume work are likely to be freed from certain contractual
Mozambique LNG may on the LNG plant, which will eventually have obligations and may eventually cancel deals,
have to postpone the two production trains capable of turning out depending how long force majeure remains in
start of production by at 12.88mn tonnes per year (tpy). A spokesman place,” he told Downstream MEA (DMEA) ear-
least a year. for the French major informed Upstream earlier lier this week.
this week, though, that the declaration of force “Exporting gas by the late 2024 target now
majeure would not be lifted until Mozambican appears to be unlikely, and financiers will need
authorities succeeded in restoring “safety and to recalculate their anticipated returns. Much
stability in a verifiable and sustainable manner.” will depend on how quickly the security situa-
According to the spokesman, Total took this tion can be improved, but with several militant
step because it has not been able to operate safely groups appearing to have joined forces, matters
or efficiently since late March, when Ahlu Sun- have become more complex.”
nah Wa-Jamo (ASWJ), an Islamist group with
ties to Islamic State (Daesh), mounted a series Total not exiting Mozambique
of vicious attacks on Palma and other villages Despite these setbacks, Total has stopped short
near the construction site. Under these circum- of withdrawing from the project.
stances, he said, the company cannot resume The company’s spokesman stressed this
work or allow personnel for the Mozambique point, telling Upstream that the company
LNG project to remain on the Afungi Peninsula. “remains committed” to developing Area 1’s gas
reserves and building the onshore LNG plant,
Contract cancellations “when conditions allow.” He also said Total
Total’s spokesman did not comment directly on would “continue to follow the evolution of the
his company’s relationships with its contractors. situation with great attention, in close contact
According to S&P Global Platts, the French with the [Mozambican] authorities.”
firm began reviewing agreements with several This stance seems to have reassured the Afri-
of its service providers last week, shortly before can Energy Chamber (AEC), an industry group
issuing declaring force majeure. It is likely to can- that advocates for oil and gas development in
cel some of these contracts soon, as the declara- Africa. “While the force majeure declaration by
tion gives it the legal right to do so. Total is a legal instrument at its disposition to
Together, the declaration and the review of procure its objectives and compromises with its
service contracts appear to signal that the $20bn lenders and the government, we firmly believe
scheme will be on hold for at least a year, with that Total will do whatever it takes to stand with
first production pushed back to 2025 instead Mozambique and its people,” the AEC wrote in a
of 2024. (Total has not commented on its time- statement later on April 26.
line, and its spokesman only told Upstream that It continued: “Total is not only an interna-
recent events would have “a consequence” for the tional company. It is an African company as

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