Total LNG Project in Mozambique Photo: LNGPrime

Total declares force majeure, stops $20bn LNG project over security threats

*French energy giant Total SE has suspended its $20 billion Liquefied Natural Gas project in Mozambique indefinitely due to an escalation of violence and Islamic State-linked militancy, halting exports of fuel that could help transform one of the world’s poorest countries

Alexander Davis | ConsumerConnect

As a result of an escalation of violence and Islamic State-linked militancy in the area, French energy giant Total SE has suspended its $20 billion Liquefied Natural Gas (LNG) project in Mozambique indefinitely.

The decision is a blow to Total, which bought an operating stake in the project for $3.9 billion in 2019, hoping to start exporting the super-chilled fuel by the end of 2024, Bloomberg report said.

It was gathered that the first phase of the gas project is designed to produce over 13 million tonnes of LNG a year.

Total was resuming work on the project March 2021, after it was stalled since January because of security threats, as more than 100 rebels raided the town of Palma nearby the site.

Dozens of people died, millions of Dollars of property was damaged and the company immediately froze plans to resume the project, report said.

But the worsening security situation is also reported to be a major setback for Mozambique, currently facing a rising death toll with hundreds of thousands of people displaced.

Exports of the fuel could help transform the economy of one of the world’s poorest nations.

The oil and gas firm in a statement Monday said that the fresh violence in the north of the Cabo Delgado province “leads Total, as operator of Mozambique LNG project, to declare force majeure.”

That’s “the only way to best protect the project interest, until work can resume.” Project finance remains in effect and “Mozambique LNG has agreed with lenders to temporarily pause the debt drawdown,” Total said.

Darias Jonker, Africa Director at Eurasia Group also stated that the force majeure gives Total “a lot of breathing room” with the construction companies and buyers of the gas, while increasing pressure on the Mozambican Government to resolve the security situation,

That will take community engagement as well as intelligence resources to remove the insurgency, he said.

Jonker said: “Overall, the downward trajectory of the situation continues.”

Force majeure is a provision that allows parties to suspend or end contracts because of events that are beyond their control, such as wars or natural disasters.

Meanwhile, contracts for site activities have been temporarily suspended, including that of the CCS JV, a joint venture between McDermott International Limited, Saipem SpA and Chiyoda Corp., Carlos Zacarias, chairman of Mozambique’s National Petroleum Institute, said at a press conference in Maputo.

Some of the agreements could be terminated depending on how long work is delayed, according to report.

Kindly Share This Story