Mozambique LNG’s fate in doubt

Although military forces have offered reassurances, Total has evacuated all its workers from its construction site on the Afungi Peninsula

WHAT: Total has stopped all work on its LNG plant and onshore complex.

WHY: Security conditions do not appear to have stabilised since ASWJ began attacking Palma on March 24.

WHAT NEXT: Maputo’s response to the crisis will affect Total’s plans for returning to work – and other companies’ plans for their own gas projects.

Uncertainty about the fate of the Mozambique LNG project has significantly grown over the last week.

France’s Total, the leader of the consortium, appears to have abandoned its hope of restarting work at the site on the Afungi Peninsula where it is building a natural gas liquefaction complex. Instead, it has withdrawn the remaining members of its workforce from northern Mozambique in the wake of an Islamist group’s attack on the nearby town of Palma on March 24.

It announced its decision in a statement dated March 27, saying: “The remobilisation of the project that was envisaged at the beginning of the week is obviously now suspended. Total has decided to reduce to a strict minimum level the workforce [at] the Afungi site.”

According to press reports, all of Total’s employees had departed from the site by April 2. As of press time, the company had not yet said when work might resume.

The French major has been working with Mozambique’s government for several months to secure protection for operations, and its efforts have borne some fruit. Last month, for example, the two sides reached an agreement on the establishment of a secure zone encompassing the construction site on the Afungi Peninsula and surrounding areas, including Palma. (The zone also covered Quitunda, the village where Total arranged to resettle people displaced by its construction project.)

Maputo’s commitments

Unfortunately, though, Maputo appears to be having difficulty upholding its commitments under the agreement.

The document called for Mozambique’s special forces, known as the Defence and Security Forces (FDS), to be responsible for setting up and maintaining the secure zone. However, FDS troops were not able to prevent Ahlu Sunnah Wa-Jamo (ASWJ), the Islamist group that has been working since 2017 to seize control of the northern Cabo Delgado province, from attacking Palma on March 24.

Nor were they able to clear the area of ASWJ fighters quickly. Instead, Palma was not declared safe until several days later, after the arrival of troops from the country’s regular armed forces, known as Forças Armadas de Defesa de Moçambique (FADM).

Meanwhile, some observers have complained that Maputo reacted too slowly to the emerging crisis. Upstream quoted Lionel Dyck, the head of Dyck Advisory Group (DAG), a private South African security contractor, as saying that FADM had been slow to provide support to his men and to local police forces.

For its part, FADM has presented a more confident face to the public. Chongo Vidigal, a spokesman for the armed forces, was quoted as saying in a Radio Mozambique report last week that the construction site was still “protected.”

Vidigal also downplayed reports of chaos and destruction in Palma and nearby areas, saying that Maputo had never been in doubt about its ability to ensure the region’s security. “At no time was its integrity at stake,” he declared.

No clear outcome

Even so, it appears that the situation is still very much in flux.

Total has reportedly left its construction site entirely in the hands of FDS troops and is now concentrating on completing the evacuation of its workforce. It is providing some support to the thousands of refugees who have tried to take shelter in or near its facilities, in the form of food, emergency transportation and evacuation services, but it is also keeping mum about when, whether or how it might resume work.

According to Joseph Hanlon, a senior lecturer at the Open University and a recognised expert on Mozambique, the French major is not likely to resume operations any time soon. Officials in Maputo will need time to follow up on offers of assistance and military training from foreign partners such as the US and Portugal, he noted.

“Will Total return? Not in the short term. It will take perhaps two years for US, Portuguese and other trainers to create a functioning army,” Hanlon wrote in an opinion piece for his Mozambique News Reports and clippings newsletter,

He also speculated that the company might very well decide to drop the Mozambique LNG project if local authorities cannot guarantee safety, security and improved conditions in the areas where it has been working. “Total has other interests in Africa; it has only spent a small part of the $20bn project cost and can still walk away. Even if it returns, it will demand a much more favourable deal with Mozambique,” he wrote.

High stakes and big money

The government of Mozambique has an incentive to try to meet such demands.

After all, Total is just one of three major international oil companies (IOCs) looking to develop the country’s offshore gas reserves. Maputo is eager to see Italy’s Eni and US-based ExxonMobil proceed with their own Coral South LNG and Rovuma LNG projects. If all three projects move forward, they will bring at least $50bn worth of direct investments into the country, while also creating new streams of jobs and budget revenue.

Even so, the ability of FADM and FDS to deliver safety and security is far from assured. As such, the Mozambican government will have to work hard to overcome perceptions that it is not prepared to restore order in Cabo Delgado.

It may have to work harder for Total and ExxonMobil than for Eni, though, since the latter company intends to install both processing and production facilities offshore, rather than onshore. As Ian Simm, Principal Advisor at the IGM Energy consultancy, told AfrOil: “The attack raises serious medium-term concerns about the development of Mozambique LNG, given Maputo’s apparent inability to ensure security. This will also apply to the Rovuma LNG project, though the use of a floating LNG facility means that Coral South LNG may be largely unaffected.”