Totalenergies may return in early 2024

Maputo, 11 Jul (AIM) – The French oil and gas company TotalEnergies will only return to Mozambique in early 2024, according to Pranav Joshi, an analyst with the Norwegian energy consultancy, Rystad Energy, cited by the Portuguese news agency, Lusa.

TotalEnergies heads the consortium that plans to build natural gas liquefaction plants on the Afungi Peninsula, in Palma district, in the northern province of Cabo Delgado.

But work in Afungi came to an abrupt halt in March 2021, when islamist terrorists attacked and occupied Palma town. TotalEnergies decreed a state of force majeure, and withdrew all its staff.

Since then, the Mozambican defence and security forces, with their allies from Rwanda and SADC (Southern African Development Community) have driven the terrorists out of Palma and the neighbouring district of Mocimboa d Praia.

TotalEnergies, however, clearly wants cast iron security guarantees before it returns to Afungi. According to Joshi, the French company will only return in 2024, and that will delay the start of gas production to 2028.

Joshi warned that “matters could be complicated since the contracts may need to be renegotiated, and the new agreements could include the impact of inflation. This could delay the lifting of force majeure into next year. So we estimate that the liquefied natural gas project (LNG) will only begin in 2028”.

TotalEnergies also made its return conditional on an independent report on the security and social conditions of the local population.

“TotalEnergies seems to be working behind the scenes to ensure a smooth lifting of the ‘force majeure’ and were targeting the end of the year, having recently published a report signed by human rights expert Jean-Christophe Rufin, which made many recommendations, including the establishment of a multi-year socio-economic budget of 200 million dollars”, Joshi said.

He noted that there has been a sharp rise in costs for TotalEnergies’ operation in Mozambique.

But this increase in costs is not exclusive to Mozambique. “Globally, the costs of liquefied natural gas have increased by 25 percent; however, based on the scope and execution model, the value varies from project to project, typically between 15 and 30 percent”, Audun Martinsen, the head of energy research at Rystadt, explained.

“Therefore, if TotalEnergies has not changed the project concept, they will be exposed to the same level of inflation cost increases as others”, he added.
Mozambique has three development projects approved to exploit natural gas reserves in the Rovuma basin, off the coast of Cabo Delgado. Two of these projects involve pumping gas from the seabed to land, where it will be liquefied before being exported in liquid state.

One of these is the project led by TotalEnergies. The second is led by ExxonMobil and the Italian energy company, Eni, but this consortium has not yet announced its final investment decision.

The only LNG project in production is the floating platform in Area Four of the Rovuma Basin, which processes the gas for export directly at sea. Production from the floating platform began in November 2022. It is expected to produce 3.4 million tonnes of LNG per year.

This is dwarfed by the two onshore project which, between them, should produce more than 28 million tonnes of LNG per year.
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