Mozambique: Terrorists Threaten $50bn LNG Projects

By Jorge Joaquim

The terrorist attacks in gas-rich Cabo Delgado province are threatening to disrupt the African country’s burgeoning natural-gas developments, including the $50bn projects led by French energy giant Total, Italian oil major Eni and American multinational oil and gas corporation Exxon Mobil.

Since 5 October 2017, a wave of armed attacks has been targeting the gas-rich Cabo Delgado province in the north of Mozambique, where most of the major gas discoveries have been made in recent years. In July 2020, French oil giant Total signed a $14.9 billion financing agreement for a gas project called Mozambique LNG, the largest foreign direct investment in Africa to date, with a total post-FID investment of $20 billion.

The project received direct and covered loans from eight export credit agencies, 19 commercial bank facilities and a $400 million loan from the African Development Bank. The financing has been agreed despite the terrorists that have killed more than 2,500 people and displaced over 600,000.

The projects were supposed to be following the normal course of its installation, but it was stopped as the terrorists attacked near the town of Palma — just 20 km from the site of Mozambique LNG. Due to the situation, since December that Total is reducing its staff from the works on the natural gas megaproject.

The Mozambique LNG Project started with the discovery of a vast quantity of natural gas off the coast of northern Mozambique in 2010, leading to a $20bn FID in 2019. The plans for the approximately 65 trillion cubic feet of recoverable natural gas include a two-train project with the ability to expand up to 43 million tonnes per annum (MTPA).

Its geographic location positions the project well to meet Atlantic and Asia-Pacific market needs, as well as tap into the growing energy demands of the Middle East and Indian sub-continent. The Mozambique LNG project is intended to begin production in 2024. However, the attacks have raised major questions over the timelines for such huge undertakings.

On 1 January 2021 a clash between the police and terrorist infiltrators was registered in the resettlement Quitanda, a new town built to house people resettled from the areas of the Afungi Peninsula where Total is building a natural gas liquefaction plant. when the police discovered the terrorist infiltration, they went to the house where the infiltrators were hiding. They were met with shots, and returned fire. In this clash, one terrorist informant was killed and a policeman was injured.

Some of the incursions have been claimed by the ‘jihadist’ Islamic state group since 2019.

Nyusi and Total CEO discuss security questions

The investors are concerned with the attacks, wich have been claimed by the ‘jihadist’ Islamic state group since 2019. In January 2020, Total Chief Executive Officer Patrick Pouyanné and Mozambican president Filipe Nyusi met to discuss the worsening security situation. They then agreed to further strengthen security around the natural gas venture.

Instability in the area has concerned the Mozambican authorities, since the LNG project is the largest foreign investment in the country ever.

In August 2020, Total had already announced a revision of MoU with the Mozambican government for the operation of a joint security force including the defence and security forces to protect the project. So far, engineering and procurement activities have been taking place, with 2021 being the year for the start of the construction phase of the gas city and industrial zone for the liquefaction of the gas to be brought ashore from the drilling of the sea bottom of the Rovuma basin. However, the fact is that due to the recent attacks Total continues to reduce the number of workers at the project’s onshore construction site on the Afungi peninsula.

Last year Patrick Pouyanne has called on European countries to help Mozambique fight the insurgency, warning that Islamic State is creating an enclave in the country. He said it would be good if the situation is brought back under control, not just for Total’s project, but for the stability of the region. He noted that France has a vested interest in the region, as it owns Mayotte, an island between Mozambique and Madagascar.

At the end of January the publication Africa Energy Intelligence wrote that Total is hoping to set up a logistics base in Mayotte to help it develop its Mozambican gas project. The French overseas territory has highlighted its many advantages to Total: it is located 500km from Pemba, the capital of Cabo Delgado; it has a deep-water port; a small naval base in Dzaoudzi; a detachment of the French Foreign Legion; and a fully functioning hospital complex. In the future, Mayotte hopes Total will also base the families of its expatriate workers there – but at the moment workers are being deployed without their families because of the covid-19 pandemic.

However, Mayotte’s 1,930m runway at its main airport is too small to accommodate very large aircraft and Total’s subcontractors in Mozambique are reluctant to move to the island, although Total has asked them to assess the costs of shifting some operations there. The company views the island as a useful fallback option should the security situation in Cabo Delgado continue to deteriorate. According to AEI, French authorities are in favour of the Mayotte option, which they see as the “patriotic” choice.

However, Total has denied suggestions that it could be moving its base of operations for its natural gas project Mozambique LNG away from Mozambique and onto the Mayotte, in the Indian Ocean. A statement from the company seen by Pan African Visions saysthat it would continue to base its operations in Pemba. However, it added that the project “is investigating options to carry some offshore support operations in the region to optimize part of its logistical chain and planning including in Mayotte by using existing infrastructures”. The company added that it remained focused on delivering local content goals, including giving $2.5bn-worth of contracts to Mozambican businesses.

Other LNG projects

As well as Mozambique LNG, the other major LNG projects sanctioned for development in the country are the Rovuma LNG project, led by ExxonMobil, and the Coral South FLNG project, led by ENI. Both form part of the Area 4 development of the Rovuma Basin, Cabo Delgado province, offshore Mozambique.                                   

Exxon has delayed a final decision on its $30bn Rovuma LNG project until 2022. Eni is Exxon’s project partner for Rovuma LNG. The company is developing the 15.2 million mt/year Rovuma LNG facility close to the Total project.

Eni is also operator of a smaller 3.4 million mt/year capacity floating Coral LNG project, the world’s first newly-built deepwater floating liquefaction plant, which could begin operations in 2022. The last of 13 topside modules has been lifted and installed aboard Eni’s Mozambique-bound Coral-Sul FLNG facility, being built by Samsung Heavy Industries in South Korea. The company informed last year that the lifting of the module marks the end of the onshore-modules fabrication campaign configuring the entire gas treatment and liquefaction plant. According to Eni, the Coral Sul FLNG unit is expected to sail away in 2021.

All these projects will be reality if the security situation is controlled. Mozambique is working with mercenaries and some countries are offering help. One of the last is Nigeria. The country’s Minister of Foreign Affairs, Geoffrey Onyeama, visited Mozambique over the end of January and met Prime Minister Carlos Agostinho do Rosário. Mr Onyeama said Nigeria was ready to share its experience of fighting Islamist militants and provide support to Mozambique.

A new cooperation deal between the European Union and Mozambique on the violence  in Cabo Delgado should be reached this february, Pan Africn Visions has learned. The framework will aim to support Mozambique in the fight against terrorism by giving support in humanitarian, development, and security areas. Some observers say that the involvement of other countries and organisations in supporting Mozambique could reflect competition for influence in Africa.

Meanwhile, in general, the terrorists seem to be in retreat as supplies are scarce. Other opinions say that the foreign financiers are no longer paying them. The fact is that the number of attacks reduced.

A former captive, who was held in the village of Manilha, in the district of Mocímboa da Praia, said that the terrorists had recently met a Tanzanian man, thought to be their leader, Carta de Mocambique reported. The Tanzanian said that the attacks could not continue, because there was no more money. The meeting ended in confusion because the Tanzanian advised the Mozambicans to return to their home communities. The terrorists said they could not do this because they feared for their lives. The former captive claimed that the terrorists could no longer survive at their bases, because with villages deserted, there was no food available to plunder and their families were starving.

A member of the government forces positioned in Palma told Pan African Visions that the silence of terrorists is frightening because they are unpredictable.

While that, an application to build a 2,600kmgas pipeline linking the Rovuma Basin in Mozambique and Gauteng in South Africa was submitted to the Mozambican government. If approved the works would start in the next three months, with the first phase, from the Rovuma Basin to Maputo province, to be finished in 2025. The planned investment is around $6bn, which would come entirely from private investors. If constructed, the African Renaissance Gas Pipeline could be one of the biggest LNG projects in the world.

*Culled from February Issue of PAV Magazine

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