Page 5 - AfrOil Week 17 2021

AfrOil COMMENTARY AfrOil

According to S&P Global Platts, the French firm international company. It is an African company
began reviewing agreements with several of its as well, as it is one of its most prominent inves-
service providers last week, shortly before issu- tors and employers. Total’s connection to the
ing declaring force majeure. It is likely to cancel African people goes far beyond its investments
some of these contracts soon, as the declaration at a macro level. While many other multina-
gives it the legal right to do so. tional companies have left the continent, Total
Together, the declaration and the review of has remained, and we believe this commitment
service contracts appear to signal that the $20bn to the continent and Mozambique specifically
scheme will be on hold for at least a year, with will continue to remain.”
first production pushed back to 2025 instead
of 2024. (Total has not commented on its time- Economic impact
line, and its spokesman only told Upstream that Even if Total goes forward with the project, how-
recent events would have “a consequence” for ever, the delays and contract cancellations stem-
the Mozambique LNG work schedule.) ming from the declaration of force majeure are
Meanwhile, the problems are not con- sure to hurt Mozambique’s economy.
fined to the onshore construction site. Car- In the near term, they will reduce the vol-
los Zacarias, the chairman of Mozambique’s ume of money flowing into the country and the
National Petroleum Institute (known locally as number of local workers and companies hired.
INP), was quoted by Upstream as saying earlier But they will also push back the date at which
this week that Total had also stopped work on Maputo will be able to start collecting its share
the upstream portion of the project – namely, of earnings from Mozambique LNG. According
preparations for gas production at Golfinho and to previous reports, the scheme is expected to
Atum, two fields within the offshore block des- generate nearly $31bn in budget revenues over a
ignated as Area 1. period of 25 years.
According to Ian Simm, principal advisor at Furthermore, Total’s decision to declare force
the IGM Energy consultancy, delays are prob- majeure on Mozambique LNG could influ-
ably inevitable under current circumstances. ence ExxonMobil’s approach to the proposed
“The declaration of force majeure eases the Rovuma LNG project, which targets offshore gas
strain on the Mozambique LNG partners, paus- fields near Area 1. The super-major has already
ing the drawdown of debt and freezing contracts slashed its capital expenditure budget this year The delays
for associated development works. This will be and has indicated that it will focus on a hand-
of little consolation to contractors, as the part- ful of its most profitable projects. This bodes ill and contract
ners are likely to be freed from certain contrac- for Rovuma LNG, as the turmoil in northern
tual obligations and may eventually cancel deals, Mozambique makes the way forward for the cancellations
depending how long force majeure remains in project even more challenging. stemming from
place,” he told AfrOil earlier this week. “Export-
ing gas by the late 2024 target now appears to Global context the declaration
be unlikely, and financiers will need to recalcu- Outside Mozambique, Total’s woes may come
late their anticipated returns. Much will depend as a relief for competitors in other regions that of force majeure
on how quickly the security situation can be are hoping to build new liquefaction capacity
improved, but with several militant groups in time to meet demand from the middle of the are sure to hurt
appearing to have joined forces, matters have decade. Mozambique’s
become more complex.” Competition has increased dramatically in
the LNG market in recent years, with new pro- economy
Total not exiting Mozambique jects starting up in several countries, including
Despite these setbacks, Total has stopped short the US, Russia and Australia. Now Qatar is try-
of withdrawing from the project. ing to regain its dominance of the LNG market
The company’s spokesman stressed this by expanding capacity while slashing costs.
point, telling Upstream that the company Indeed, Qatar Petroleum’s recent final
“remains committed” to developing Area 1’s gas investment decision (FID) on the North Field
reserves and building the onshore LNG plant, East (NFE) expansion is set to raise the coun-
“when conditions allow.” try’s liquefaction capacity from the current
He also said Total would “continue to follow level of 77mn tpy to 110mn tpy by 2026. QP has
the evolution of the situation with great atten- described NFE as the largest LNG project ever
tion, in close contact with the [Mozambican] to be sanctioned, and it is planning to raise its
authorities.” liquefaction capacity even further to 126mn tpy
This stance seems to have reassured the Afri- later in the decade.
can Energy Chamber (AEC), an industry group These aggressive Qatari expansion plans
that advocates for oil and gas development in make it more challenging for LNG projects else-
Africa. “While the force majeure declaration by where to proceed. Indeed, two of the proposed
Total is a legal instrument at its disposition to liquefaction projects on the US Gulf Coast have
procure its objectives and compromises with its been scrapped since the start of this year. The
lenders and the government, we firmly believe cancellation of one of these, Galveston Bay LNG,
that Total will do whatever it takes to stand with has been attributed to challenges related to its
Mozambique and its people,” the AEC wrote in location; however, market conditions remain
a statement later on April 26. challenging for many proposed new LNG
It continued: “Total is not only an export plans.

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