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Mozambique LNG project delayed by 'at least a year' due to security issues: Total

Highlights

Total declared force majeure on project operations on April 26

French major had previously hoped for first LNG in 2024

Sharp rise in militant attacks in northern Mozambique

London — The Mozambique LNG project will be delayed by "at least a year" due to the "very serious" security situation in the southeast African country, Total's Chief Financial Officer Jean-Pierre Sbraire said April 29.

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On April 26, Total declared force majeure on its Mozambique LNG operations and removed all staff from the site on the Afungi Peninsula in response to the "severe deterioration" in the security situation in the southeast African country.

Related content: Assessments ongoing to 'preserve' value of Mozambique LNG project: Saipem

"Obviously, these events will impact the project and at this stage we estimate an impact of at least a year of delay," Sbraire said on an analyst call.

"We hope that the actions carried out by the government of Mozambique and its regional and international partners will enable the restoration of security and stabilize the Cabo Delgado province in a sustained manner," he added.

Total had hoped to produce the first LNG from the project in 2024, and this means it has been now pushed back till at least 2025.

"We are managing the situation with contractors to minimize spending as long as we do not have clarity on the situation," said Sbraire.

In February, Total CEO Patrick Pouyanne said the Mozambique LNG project, whose capacity previously was pegged at 12.9 million mt/year, was 21% complete as of the end of 2020.

Total had already suspended plans to resume construction work at Mozambique LNG and cut staffing levels to the minimum in late March.

The security situation in Mozambique has worsened since late March when dozens of people were killed in the attacks by Islamist militants in an attack on the town of Palma, close to the site of the LNG project.

Militancy escalation

Total on March 24 had signaled a restart of work at Mozambique LNG -- designed to have a capacity of 13.1 million mt/year -- after security was beefed up following an escalation of the Islamist insurgency in the country at the end of 2020.

The attacks in Palma began at almost the same time as Total issued its statement on March 24.

Mozambique's more than three-year-old insurgency saw militants close in on the site of the project on the Afungi Peninsula -- also home to ExxonMobil's planned 15.2 million mt/year Rovuma LNG project -- at the end of 2020.

A number of groups are now part of the insurgency -- which also spread to offshore tourist islands in the autumn -- including the Ahlu Sunnah Wa-Jamo, or ASWJ, group and the Islamic State's Central Africa Province, or ISCAP, which has declared Mocimboa da Praia as the capital of its province.

This threatens more than 30 million mt/year of LNG production capacity under development in Mozambique, which would see the country join the ranks of the world's biggest LNG exporters.

Mozambique LNG has already secured long-term offtake agreements amounting to more than 11 million mt/year with the likes of Shell, France's EDF, China's CNOOC, a partnership of the UK's Centrica and Japan's Tokyo Gas, and a joint venture between Japan's JERA and Taiwan's CPC Corp.

Total operates Mozambique LNG with a 26.5% stake, having taken over the project in September 2019 as part of its deal with Occidental to buy assets the US company had acquired with its purchase of Anadarko.

Its partners are ENH (15%), Mitsui (20%), ONGC Videsh (10%), Beas Rovuma Energy (10%), BPRL (10%), and PTTEP (8.5%).

The initial two-train project could be expanded, with a potential capacity of as much as 43 million mt/year, according to the project's website.