Mozambique: Gas clients, banks believe in Total project viability – government

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Mozambique: Gas clients, banks believe in Total project viability – government

8:25 CAT | 28 Apr 2021

File photo: Miramar

Carlos Zacarias was speaking in an interview on public broadcaster Rádio Moçambique.

The chairman of the Mozambican National Oil Institute (INP) said on Wednesday that the banks that finance Total’s gas project and customers believe in the viability of the business despite the suspension of the project due to armed violence.

Total “has discussed with the financial backers [the suspension of the natural gas project] and everyone believes there is room to overcome this situation,” Zacarias said in an interview on public broadcaster Rádio Moçambique.

Zacarias said that customers for liquid natural gas also continued to believe in the viability of the business.

Insisting on 2024 as the date for Total’s project to start producing liquefied natural gas – even with the indefinite shutdown – the chairman of the oil sector regulator noted that “adjustments” would have to be made and management of “stress” caused by the suspension.

Zacarias warned of the possibility of the cost of funding the natural gas project increasing due to the serious situation caused by the attacks on 24 March on the town of Palma, in Mozambique’s northern Cabo Delgado province, about six kilometres from the industrial complex that is under construction for natural gas production.

The INP chairman said that the “force majeure” clause invoked by Total to cancel contracts with companies providing goods and services to the natural gas project was not binding on the Mozambican government because it was not triggered as part of the link between the French multinational and the government.

“The force majeure [invoked by Total] is not concerning the state. It is between Total’s consortium and some of the contracted companies,” he stressed.

Zacarias stressed that the invocation of the force majeure clause has a maximum duration of 360 days, after which the situation will be reassessed.

Total’s project is estimated to cost €20 billion and is the biggest private investment underway in Africa.

On Monday, the oil company announced reasons of “force majeure” for withdrawing all staff from northern Mozambique, following the worsening armed rebel violence, with the attack on Palma near the gas project.

Considering the evolution of the security situation in the north of the Cabo Delgado province in Mozambique, Total confirms the withdrawal of all personnel of the Mozambique LNG project from the Afungi site. This situation leads Total, as operator of the Mozambique LNG project, to declare force majeure,” the statement said.

Watch below, a press conference by Carlos Zacarias on 26 April, after Total announced that it had declared ‘force majeure’ on the Mozambique LNG project.

Maputo, April 26, 2021 – Speaking today at a press conference, the Chairman of INP, Carlos Zacarias, informed that Total E&P Mozambique Area 1, Limitada, the Rovuma Basin Offshore Area 1concessionaire and operator, declared with its partners, Force Majeure, due to the security situation, caused by the insurgency in Afungi, northern Cabo Delgado Province.

On the occasion, Zacarias confirmed that all field activities related to the construction of the infrastructure of the Golfinho/Atum Project are temporarily suspended and should be resumed as soon as the security situation is restored. The decision stems from the need to mitigate the negative effects arising from the application of contracts and costs in goods and services that cannot be provided or used during the period when operations are suspended, which would have negative effects on the overall cost of the Project.

He also stated that Total’s suspension of operations is intended to ensure the physical integrity and safety of the workers as well as the protection of the infrastructure. Meanwhile, “despite this suspension, Total is maintaining the necessary work at its offices while it analyzes the real impact of the situation on the Project’s implementation schedule, financing and the position of the financiers with the Empresa Nacional de Hidrocarbonetos, ENH. E.P. and the Government,” stressed Zacarias.

With the temporary interruption of operations, Total will not be able, during this period, to meet its contractual obligations and may also suspend or terminate further contracts with other goods and/or services providers depending on how long the interruption may last. Meanwhile, Zacarias made it known that the Mozambican authorities are continuing to work to restore normal safety conditions, to ensure that the Project’s operations can be resumed as soon as possible.

Since inaccurate and speculative information about Total’s withdrawal is circulating, INP’s Chairman clarified that the company has not abandoned the Project, and remains as Concessionaire and Operator, with all the rights, duties and obligations resulting from the Concession Contract for Exploration and Production in Area 1, signed with the Government in 2006.

Remember that the Liquefied Natural Gas Project “Golfinho/Atum LNG Project (Mozambique LNG)”, will be implemented from an onshore platform, at an investment of USD 20 billion, to enable the exploration of 13.12 MTPA of recoverable natural gas, over a period of 25 years, and generate direct profits of USD 60.8 billion of which about USD 30.9 billion to the State during 25 years. The Project also foresees the provision of USD 2.5 billion to cover expenses related to the contracting of goods and services to be supplied by Mozambican companies to the LNG project, during the construction phase of the plant, in addition to employment and training opportunities for national citizens.

The Final Investment Decision for the Golfinho/Atum Project was announced on June 18, 2019, and is expected to come into production in 2024.

Total E&P Mozambique Area 1 Limited, is the operator of Area 1, with a 26.5% participating interest, in partnership with ENH Rovuma Area One, S.A. (15%), Mitsui E&P Mozambique Area 1 Limited (20%), ONGC Videsh Rovuma Limited (10%), Beas Rovuma Energy Mozambique Limited (10%), BPRL Ventures Mozambique B.V. (10%) and PTTEP Mozambique Area 1 Limited (8.5%). ( Source: INP)

Source: Lusa / Miramar / INP