/ 18 December 2023

Countdown for Mozambique mega gas project quickens

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TotalEnergies (formerly known as Elf, and then Total) was, in 1971, aware of the harmful effects of global warming caused by burning fossil fuels. (Photo by Jonathan Raa/NurPhoto via Getty Images)

Mozambique’s $80 billion energy transition strategy will harness its offshore natural gas reserves in a diverse energy mix that will also exploit its abundant hydroelectric, wind and solar resources, said President Filipe Nyusi.

He was speaking at a high-level panel event at the just-ended United Nations Climate Change Conference (COP28) summit in Dubai — at a watershed moment for Mozambique’s energy future.

The country last week signed an accord with a consortium led by French power giant Électricité de France (EDF) to build and operate the $5 billion Mphanda Nkuwa hydropower project across the Zambezi River in partnership with energy company TotalEnergies and the Sumitomo Corporation, a Japanese trading company.

TotalEnergies is preparing for the resumption in early 2024 of its stalled $23 billion Mozambique liquified natural gas (LNG) project with a view to launching commercial operations in 2028. As Africa’s largest foreign direct investment project, it will directly employ almost 15 000 people and generate significant revenue for the state.  

TotalEnergies, which holds a holds a 26.5% stake in the LNG mega project, had to declare force majeure in early April 2021 after an attack by an insurgent group linked to the Islamic State in late March the northern town of Palma, killing many civilians in areas close to LNG infrastructure projects. 

TotalEnergies had, in March 2021, announced the resumption of its project following the closure and evacuation of its staff that January after the insurgents conducted sporadic attacks in areas close to its Afungi complex. That announcement was clearly the trigger for the insurgents’ attack.

Force majeure is a clause in contracts that allows parties to walk away when circumstances beyond their control occur.

TotalEnergies’ chief executive, Patrick Pouyanne, visited the project site this February to review progress. He also commissioned Jean-Christophe Rufin, an expert in humanitarian action and human rights, to conduct an independent mission to assess the situation in the northern Cabo Delgado province.

The report made several recommendations including creating an $200 million charitable development foundation for Cabo Delgado and ending bonus payments and special rations for government security forces guarding the LNG infrastructure project.

Nyusi had hoped that following Pouyanne’s visit to Mozambique in February, TotalEnergies would resume its operations in 2024. TotalEnergies has throughout the year been quietly preparing to resume operations but knows it cannot risk another force majeure moment.

The preparations have included liaising closely with other energy companies particularly, ENI and Exxon Mobil Co. Exxon has been waiting for TotalEnergies to resume operations and this will inform its decision to declare a final investment decision on its own gas project.

Predictable funding for the project remains key. Financing agreements for Mozambique LNG were struck in 2020 with direct and covered loans from eight export credit agencies, 19 commercial banks and the African Development Bank. The delay has led some investors to reassess their previous cost assumptions considering inflation and global gas market swings.

The Russian invasion of Ukraine has enhanced the strategic importance of Mozambique’s gas for Europe as it seeks to diversify its energy supplies. The TotalEnergies and Exxon installations augmenting production from a floating platform managed by ENI anchored just south of Palma, could produce up to 31 million tonnes of LNG annually, about a third of the European Union’s imports in 2022.

Before the suspension of operations, part of the production had already been pre-sold to Japan, the United Kingdom, Indonesia, and the French energy company EDF. But the Indonesian state-owned company Pertamina was reported to have cancelled its 20-year contract to buy 13.1 million tonnes a year of liquefied natural gas from the Mozambique project, which is a set-back.

Since the offtake agreements were signed, no other firm has said publicly that it has cancelled. Last month, TotalEnergies, Exxon and ENI met in Maputo with the European Union Energy commissioner for energy to discuss the gas projects. 

Last week the UK trade commissioner for Africa also visited Maputo and met TotalEnergies and Mozambican officials to discuss UK Export Finance’s $1.15 billion investment in the project. An UK appeals court in January this year dismissed a challenge by environmental NGO Friends of the Earth against this investment, finding that the agency gave sufficient regard to the 2015 Paris climate agreement when approving the project.

The French minister of state for development, Francophonie and international partnerships, Chrysoula Zacharopoulou, was also in Maputo last week, to assist the preparations for the resumption of the project. When ready, there probably won’t be a publicity drive — to avoid encouraging any opportunistic attempt for a fresh insurgent attack on the LNG facilities.

Over the past two years since the attack on Palma, security in Cabo Delgado has significantly improved. The intervention of foreign forces has helped diminish the frequency and intensity of insurgent activity in areas that previously served as insurgent strongholds. The insurgents have fragmented and reduced in size from 2 500 core supporters in 2021 to maybe 350 today, but senior Mozambican officials acknowledge that they will remain a security concern for some time yet.

According to the United Nations High Commissioner for Refugees, the conflict has left about 4 000 dead and more than 571 468 people have returned to their homes after being displaced by violence, yet continue to face multiple protection risks, and more than 850 599 remain internally displaced.

Invited by Mozambique, the Rwandan Defence Force deployed in July 2021. Its initially 1 000 but now up to 2 800 personnel, including police, have been effective in significantly reducing the insurgent threat in areas they operate — particularly focused now on places of economic importance such as the LNG infrastructure and the graphite and ruby mines.

The mining and energy companies assume that Rwanda will continue to provide a security guarantee, as confidence is still lacking about Mozambique’s defence and security forces to do the job effectively. Mozambican civilians near Montepuez in Cabo Delgado, this month said, “We feel safer when we see the Rwandans: our forces are no help if the insurgents come.”

The Southern African Development Community Mission in Mozambique (SAMIM) was also initially deployed in July 2021 and currently has about 1900 personnel in Cabo Delgado but is already drawing down for exit by mid-2024. SAMIM personnel also question the preparedness of the Mozambique armed forces to fill the gap after their mission has ended.

Technically the Rwandan and the SAMIM deployments “support” Mozambique’s security forces. The reality is that operations have often not been coordinated and that intelligence sharing has been fragmented. 

The withdrawal of the SAMIM may reduce operational complexity with less security actors. What remains a fact is that the defence and security forces of Mozambique continue to struggle operationally, and training and professionalism are urgent. The most trusted security forces in Cabo Delgado are the Rwandans, followed by the local militias and the SAMIM.

The government of Mozambique recognises the difficulties it faces and has recently changed the conscription law from two years to five to avoid churn, especially as currently trained troops are rotated out soon after training. Conscripts will, however, never provide the effectiveness Mozambique requires and attracting better volunteers for signing up for five years must be an important objective.

Mirroring the foreign military deployments, training of the Mozambican security forces is also siloed. There are three live training packages, provided by the United States, the UK and the EU and an ad hoc offer by China. Because of a slowdown in conscription recruitment, these are underdelivering, but the EU Training Mission started in 2022 (taking over from a Portuguese bilateral effort), will, by its completion in 2024, have trained 11 companies: five companies of Mozambique navy marines in Katembe, and six companies of army special forces, in Chimoio. 

The Mozambican government last week informed the EU of its interest in renewing the military training mission although Brussels is split on how to respond. France will lean hard on the EU to renew, given the strategic importance of protecting the gas project for TotalEnergies.

Satisfactory security arrangements are key for the future success of these LNG mega projects. A revised memorandum of understanding for the security around the perimeter of its project site on the Afungi peninsula of Cabo Delgado is part of this — including implementation and compliance to human rights standards, particularly the Voluntary Principles for Security and Human Rights and the UN Guiding Principles for broader corporate best practice. 

On paper there is progress. Mozambique is developing a national action plan for the UN Guiding Principles and is preparing to join the Voluntary Principles Initiative, but in practice, there remain many problems, particularly state capacity to consistently implement such initiatives. 

What is not in doubt is that this project will be economically transformative for Mozambique and, if managed wisely, could accelerate the country’s longer-term development objectives.

Alex Vines is the Africa director at Chatham House.