- Despite the lifting of the state of force majeure, the Mozambique-LNG project remains suspended, awaiting agreement between the parties
- Mozambique is trying to reduce the invoice for 4.5 billion US dollars submitted by TotalEnergies.
By MOZTIMES
Maputo (MOZTIMES) – President Daniel Chapo announced on Wednesday in Maputo that the government hopes to reach an agreement with TotalEnergies within a week. This means that the company and the government should reach consensus about the additional cost of the Mozambique-LNG project and the extension period of the exploration and production concession contract.
In late October, TotalEnergies announced it was lifting the state of force majeure, after four and a half years in which activities were paralysed, initially due to the threat of terrorism in Cabo Delgado. However, effective resumption of the project remains dependent on agreement with the Government.
TotalEnergies has submitted an invoice for 4.5 billion US dollars, corresponding to the additional costs arising from the stoppage. It also submitted a proposal for a ten-year extension to the exploration and production concession contract. The government does not agree either with the invoice or with the extension period, and it is currently negotiating a more favourable solution.
Government sources explain that, despite the suspension of the project, TotalEnergies undertook various activities which, in the view of the Executive, should not be classified as additional costs, but as part of the activities planned and budgeted within the value of the final investment decision. The difference is that, if these costs are regarded as additional investment, as TotalEnergies argues, they will be deducted from the gas export revenues, thus reducing the profit from the project and the State’s tax revenues.
The extension period proposed by TotalEnergies is 10 years, much longer than the four and a half years during which the activities were paralysed. A longer concession period means that the government will take a longer time to recover ownership of the project since, under the contract, after the end of the concession, the operator should transfer ownership to the State or negotiate a new extension, through payment of fees.
According to Daniel Chapo, the agreement to be announced next week “should benefit both the Mozambican people and the investor”.
It is expected that TotalEnergies will agree to give up some of its initial demands. However, it is most unlikely that the value of the additional costs resulting from the paralysis of the project will be reduced significantly.
Chapo also declared that, after the definitive resumption of the TotalEnergies project, the other gas exploration project in the Rouma Basin - Rovuma LNG, operated by the US company ExxonMobil — should announce its final investment decision. Chapo estimated this will happen in June or July next year.
The three gas projects in the Rovuma Basin, including the FLNG project, operated by the Italian energy company, ENI, represent a total investment estimated at 50 billion US dollars, and could generate revenue for the state of up to 100 billion dollars over a 30-year period. However, the persistent lack of security caused by the terrorist attacks in the region could reduce the expected revenue due to the high security costs that the companies will have to bear. (MT)
