Page 11 - GLNG Annual Review 2021

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It continued: “Total is not only an interna-
tional company. It is an African company as
well, as it is one of its most prominent investors
and employers. Total’s connection to the Afri-
can people goes far beyond its investments at a
macro level. While many other multinational
companies have left the continent, Total has
remained, and we believe this commitment to
the continent and Mozambique specifically will
continue to remain.”

Economic impact
Even if Total goes forward with the project, how-
ever, the delays and contract cancellations stem-
ming from the declaration of force majeure will
hurt Mozambique’s economy.
In the near term, they will reduce the vol-
ume of money flowing into the country and the
number of local workers and companies hired.
But they will also push back the date at which
Maputo will be able to start collecting its share
of earnings from Mozambique LNG. According
to previous reports, the scheme is expected to
generate nearly $31bn in budget revenues over
a period of 25 years.
Furthermore, Total’s decision to declare force The US is not the only country where devel-
majeure on Mozambique LNG could influ- opers are backing away from LNG project pro-
ence ExxonMobil’s approach to the proposed posals. In March, Chevron announced that
Rovuma LNG project, which targets offshore it had ceased directing any further funding to
gas fields near Area 1. The super-major has the proposed Kitimat LNG project in Canada,
already slashed its capital expenditure budget having tried and failed to sell its 50% stake in
this year and has indicated that it will focus on the project.
a handful of its most profitable projects. This All of these developments suggest that
bodes ill for Rovuma LNG, as the turmoil in despite LNG’s relative resilience during the early
northern Mozambique makes the way forward months of the coronavirus (COVID-19) and the
for the project even more challenging. dramatic spike in demand for the super-chilled
fuel over the Northern Hemisphere’s winter,
Global context conditions remain challenging for developers.
Outside Mozambique, Total’s woes may come as And in that context, the deferral – or even loss
a relief for competitors in other regions that are – of Mozambique LNG’s projected volumes
hoping to build new liquefaction capacity in time of 12.88mn tpy may boost competitors’ medi-
to meet demand from the middle of the decade. um-term prospects.
Competition has increased dramatically in Analysts including Tudor, Pickering, Holt &
the LNG market in recent years, with new pro- Co. (TPH) anticipate that LNG supply could
jects starting up in several countries, including overwhelm demand over the 2026-2030 period.
the US, Russia and Australia. Now Qatar is try- Similarly, the Norwegian consultancy Rystad
ing to regain its dominance of the LNG market Energy has previously warned that if Qatar
by expanding capacity while slashing costs. pushes ahead with its LNG expansion ambi-
Indeed, Qatar Petroleum’s recent final invest- tions – as it is now doing – potential projects
ment decision (FID) on the North Field East elsewhere in the world could face a grim outlook
(NFE) expansion is set to raise the country’s in competition against Qatar’s low break-even
liquefaction capacity from the current level prices.
of 77mn tpy to 110mn tpy by 2026. QP has In the longer term, however, the outlook is
described NFE as the largest LNG project ever different. Another consultancy, Wood Macken-
to be sanctioned, and it is planning to raise its zie, recently warned of a supply gap of 50mn tpy
liquefaction capacity even further to 126mn tpy in 2030, and its director of LNG, Giles Farrer,
later in the decade. has said he expects the shortfall to widen to
These aggressive Qatari expansion plans more than 170mn tpy by 2035.
make it more challenging for LNG projects else- In the shorter term, though, LNG produc-
where to proceed. Indeed, two of the proposed ers rely in large part on off-take agreements to
liquefaction projects on the US Gulf Coast have underpin the financing plans for their devel-
been scrapped since the start of this year. The opments, and while there has been anecdotal
cancellation of one of these, Galveston Bay evidence of more demand for the fuel since the
LNG, has been attributed to challenges related winter, few new long-term supply deals have
to its location; however, market conditions been announced. Indeed, Qatar has dominated
remain challenging for many proposed new the handful of long-term supply deal announce-
LNG export plans. ments that have been made in recent months.™

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