The French oil and gas company TotalEnergies looks set to resume its liquefied natural gas (LNG) extraction project in Mozambique’s troubled Cabo Delgado province, two years after it suspended activities due to a terror attack at its facilities.
Work on the Mozambique LNG project near the northern city of Palma could resume as early as July this year, according to the chief executive of Saipem.
The Italian energy group has agreed to a $3.85 billion deal to help TotalEnergies restart production in Mozambique.
The project to extract, cool and export natural gas for the international market, from the Rovuma Basin in Palma, is worth an estimated $20 billion.
Operations were abandoned in March 2021, after militants linked to the Islamic State group overran the nearby town of Palma, causing most of its citizens flee.
The arrival of Rwandan peacekeepers in northern Mozambique in July 2021 has seen government control return to Palma and the surrounding districts.
It is expected that work could resume in July, two years after TotalEnergies declared a ‘force majeure’ (an ‘act of God’ for which no one couldn't be held liable), causing hundreds of people to be put out of work and dozens of companies to have their service contracts suspended.
Before the attack in Palma, TotalEnergies and its partners were building a mega offshore industrial complex for the production of LNG.
According to the CEO of TotalEnergies, Patrick Pouyanne, the resumption of the works must consider the costs of exploiting natural gas before it can go ahead.
'I'm in no hurry to start again, if we see costs rising too much we will wait,' he warned in a telephone conversation with investors.
Pouyanne was recently in Mozambique, which has seen a major return to normality, since the Rwandan intervention.
He made it clear, however, that the decision to reopen the plant will depend heavily on the financial viability of the long-shuttered operations.
In addition to the costs of renegotiating contracts with local suppliers and subcontractors, Pouyanne also stressed that the issue of human rights and contractors’ safety will also play a key part in the decision.
'I have a clear view on the human rights issue,' the businessman added.
It has been reported that TotalEnergies has set three conditions for the resumption of the project, including security guarantees in Cabo Delgado, which it acknowledged are improving.
It also cited the protection of human rights, which will be clarified by a mission entrusted to Jean-Christophe Rufin, 'a recognized expert in humanitarian action and human rights'.
Crucially, though, the company has said there must be 'a clear vision of the project costs after an interruption of more than two years', adding that such costs 'should be maintained and not increased'.
TotalEnergies owns a 26.5 per cent stake in the Mozambique LNG Project, which has capacity to produce 12.88 million metric tons of LNG per year.
Its partners in the consortium are Japan's Mitsui E&P, which holds a 20 per cent stake, Mozambique's National Hydrocarbon Company (ENH), which owns 15 per cent, Thailand's PTTEP with 8.5 per cent, and three Indian companies – ONGC Videsh Rovuma Limited, Beas Rovuma Energy Mozambique Limited, BPRL Ventures Mozambique – which have 10 per cent each.
While news of the possible resumption of operations has been welcomed by its former employees, as well as the national and multinational companies that provided services to the site, including the Mozambican state itself, it is still unclear when exploration activities will resume in the region.
'Total has communicated a lot and meets regularly with the Mozambican authorities,’ said the French ambassador to Mozambique, Yann Pradeau.
'I think it is up to them to say what their problems are and what their industrial calendar is after they make a decision. I can't speak for them, but what I can say is that we have the opportunity to have a major investor in the fundamental sector for Mozambique and for energy.’
He added: ‘We also have 65 French companies that work in Mozambique, that invest in Mozambique, and it is this number that we want to increase.’
The province of Cabo Delgado has been facing an armed insurgency for five years.
Government forces were routed from a number of major towns in 2021, including Palma. This led to the government to seek help from Rwanda, and later the Special Forces of the Southern African Development Community (SADC).
Since July 2021, this pan-African force has been tasked with liberating districts near gas projects, but has since had to deal with new waves of attacks in the south of the region and in the neighboring province of Nampula.
Violence has also spread to neighbouring districts in Tanzania.
According to the United Nations High Commissioner for Refugees (UNHCR), more than a million people have been displaced by the conflict, which has already caused about 4,000 deaths.