French energy giant Total SE has announced the indefinite suspension of its $20 billion liquefied natural gas (LNG) project in Mozambique due to an escalation of violence in the area, which includes jihadist attack by Islamic State-linked militants.
The oil firm also said that the fresh outbreak of violence in the north of the Cabo Delgado province has led Total to declare a force majeure, a legal concept meaning that it can suspend fulfilling its contractual obligation, as that is the only way to best protect the interest of the project until work resumes.
According to a report from Bloomberg, this disclosure is contained in a statement issued by Total on Monday, April 26, 2021.
The decision is a blow to Total, which bought a 26.5% stake in the project for $3.9 billion in 2019 with the hope of starting the export of super-chilled fuel by the end of 2024 just as the increasing violence is also a setback for Mozambique, which is now losing out on jobs and revenue from the gas sales.
Last week, the Confederation of Economic Associations of Mozambique (CTA) said Total had suspended contracts with a series of businesses indirectly involved in the gas project as the association’s president, Agostinho Vuma, said that Total had assured that the gas project would resume once it is safe.
On March 24, some hours after Total said it was resuming work on the project, stalled since January because of security threats, over 100 rebels raided the town of Palma with dozens of people killed, millions of dollars of property damaged and the company immediately suspending plans to resume the project.
The project had been gaining momentum as Total acquired the operator stake from Anadarko Petroleum Corp. in 2019. The company was making progress on early construction, including an airport along with accommodations for workers. Just at the same time, an insurgency was rising in Cabo Delgado province.
According to reports, the violence has left at least 2,780 people dead and also displaced over 700,000 people. While the government has pledged to restore peace, attacks have grown closer to the site, resulting in the evacuation of workers.
This has raised serious doubts over the viability of the project which is the biggest single investment in Africa even before the latest raid.
What you should know
Mozambique LNG had completed nearly $16 billion in funding by July last year, involving several banks, despite a slowdown in energy investment as the coronavirus hammered the global economy.
The LNG project includes the development of the Golfinho and Atum offshore natural gas fields and the construction of a two-train liquefaction plant with a capacity of 13.12 million tonnes per annum.