By Isac Joaquim, consultant (e-mail: isacjoaquimdp@gmail.com)
Presentation of the Mozambique LNG project
Maputo (MOZTIMES) - Mozambique LNG, with an estimated potential of 65 trillion cubic feet, is a USD 23 billion project with a production capacity of 13.1 million tonnes of LNG per year, which could eventually reach 43 Mt/year.
The project was suspended in April 2021 on grounds of "force majeure", due to jihadist attacks near the industrial site. The French company TotalEnergies is the operator with a 26.5% stake. The other shareholders are Mozambique’s own National Hydrocarbons Company, ENH (15%), Mitsui of Japan (20%), the Indian companies ONGC Videsh, Oil India and Bharat PetroResources (10% each) and PTTEP of Thailand (8.5%).
The consortium's decisions are taken on a collegiate basis, contrary to what is often assumed. It is also worth noting the importance of the three Indian companies, which own 30% of the shares, i.e. more than the operator, TotalEnergies. Among the 28 financial institutions that took part in loan agreements in 2020 for a total amount of 14.9 billion, we find 13 export credit agencies and 15 commercial banks. They are as follows:
Financial institutions (public) : Export Import Bank of the United States (US EXIM), Japan Bank for International Cooperation (JBIC), UK Export Finance (UKEF), Export-Import Bank of Thailand (Thai Exim), Servizi Assicurativi del Commercio Estero (SACE), Nippon Export and Investment Insurance (NEXI), Export Credit Insurance Corporation of South Africa (ECIC), Atradius, Cassa Depositi e Prestiti, African Development Bank (AfDB), African Export-Import Bank, Development Bank of Southern Africa and the Industrial Development Corporation of South Africa.
Banks (private): Société Générale, Crédit Agricole, Mizuho Bank, JP Morgan, Standard Chartered Bank, MUFG Bank, Sumitomo Mitsui Banking Corporation, Sumitomo Mitsui Trust Holdings, Shinsei Bank, Nippon Life Insurance, ABSA Bank, Nedbank, Rand Merchant Bank, Standard Bank and ICBC.
TotalEnergies is doing everything it can to revive the project
Lobbying in the United States was not enough for TotalEnergies to obtain the necessary funds, which would have enabled Mozambique LNG to lift the suspension on grounds of "force majeure". The project was due to come on stream in 2024, but will not do so until 2030. In fact, despite the deployment of a contingent of Rwandan military and police officers, partly financed by the European Union, a TotalEnergies spokesman recently announced that operations in Mozambique remain suspended for security reasons.
However, Patrick Pouyanné, CEO of TotalEnergies, said the opposite in a letter sent to the US authorities on 3 December: "The resumption of the development of the project can now be envisaged".
This letter was distributed by Primus Responsum, which was hired by TotalEnergies on 25 November 2024. This pressure group was to help TotalEnergies obtain final approval for financing from the board of directors of the US Export-Import Bank (Exim Bank), which had agreed in 2020 to contribute 4.7 billion dollars. According to a US Department of Justice filing dated 16 December 2024, this represents the largest share of the project's financing.
The contract between TotalEnergies and Primus Responsum was for an initial amount of 40,000 dollars until 15 December, then 30,000 dollars per month until it is terminated. The lobbying group was to identify key personnel at Exim and in the US administration, then under President Joe Biden. It would have received a bonus of 250,000 dollars, if the export financing had been approved before Trump took office on 20 January 2025.
Although he has said that US Exim is expected to confirm its support for the project in the next few weeks, when it presents its results on 5 February 2025, the CEO of TotalEnergies is worried. In his letter to the US authorities, he writes that "the transition of the United States to a new administration must not compromise the financing structure already in place and approved, nor result in the termination of the entire project".
This new pro-hydrocarbon and highly protectionist administration could have a significant impact on the Mozambique LNG and Rovuma LNG projects (operated by the American company ExxonMobil), which are both awaiting the green light from EximBank in 2025 before making a final investment decision.
With part of the reserves already sold, the United States, now the world's leading LNG exporter, is unlikely to be in a hurry to amplify the already strong competition from Qatar, the United Arab Emirates and Oman on the Asian LNG market.
In 2024, Pouyanne did everything in his power to convince a US administration that ultimately proved reluctant. The year had started well for the Mozambique LNG project: on 5 February 2024, Exim Bank's Transactional Risk Committee approved the restart of the loan, but no vote by the Board of Directors was scheduled. In July 2024, Exim Bank's president said the project could "help counter competition from countries like China and Russia" and "unlock opportunities for US companies in Africa".
In his letter dated 3 December, Patrick Pouyanné confirmed the comments made by the president of Exim Bank, adding that "this project will support or create more than 16,000 American jobs in manufacturing and related services". However, the uncertainties generated by Trump's arrival in power and the United States' tendency to lose interest in Africa could explain Pouyannés concerns. The security environment and governance issues are causing concern in Washington, which is taking its time over investment decisions.
Obstacles to the project are continuing to grow. In Mozambique, protests against the disputed election of Daniel Chapo in October resulted in more than 300 deaths at the hands of the authoritarian Frelimo regime. Despite statements by outgoing President Filipe Nyusi at the handover of power, the insurgent movement pledging allegiance to the Islamic State is still present in Cabo Delgado province.
In addition, a group of 124 civil society organisations from Mozambique and around the world have opposed this project, which has been described as a "carbon bomb" that threatens local ecosystems and the global climate[i]. Mozambique LNG has also been accused of underestimating the humanitarian and security risks. TotalEnergies has refuted allegations that the company was informed that the troops guarding the industrial site were responsible for rapes, detentions and murders.
The NGOs also claim that this project benefits neither Mozambique nor the local communities. Indeed, apart from those affiliated to Frelimo, Mozambicans no longer believe that the successful implementation of this project could have a significant impact on the country's economy and contribute to the domestic energy supply. There are no plans to meet domestic demand, not even in the form of royalties. Local residents accuse TotalEnergies of plundering resources and fear that exports will never finance the local energy supply.
What's more, in December 2024, a bill banning US aid to countries or entities supporting fossil fuel activities was introduced by a California congressman in the United States. In Europe, two export credit agencies have announced that they are questioning their participation in this project. The UK, whose support programme is valued at 1.15 billion dollars via Export Finance UK, has pledged to end all new export finance for oil and gas projects following COP26 in 2023, and has sought legal advice to withdraw from the Mozambique LNG project. For its part, the Dutch government has decided to reconsider the commitment of its export credit agency, Atradius, and is asking for a reassessment of its position before granting around one billion euros in export credit insurance.
The Americanisation of TotalEnergies
Most people think that TotalEnergies is a French company, but the reality is quite different: the strategy of TotalEnergies, which has become the leading US LNG exporter, is increasingly focused on the United States. The case of Mozambique is an illustration of this confusion. At the CEO's meeting with President Chapo on 27 January, the two men reaffirmed their commitment to pursuing the project. Pouyanne reportedly delivered a letter of congratulations from President Macron to President Chapo, despite the many controversies surrounding his election. The CEO was accompanied by Maxime Rabilloud, Managing Director of TotalEnergies in Mozambique, and Nicolas Cambefort, Project Director, both from France. The latter replaces Stéphane Le Galles, who is also French, but this change will take place over a period of several months. It is also worth noting that TotalEnergies has entrusted French doctor and diplomat Jean-Christophe Rufin with an independent mission to assess the humanitarian situation in Cabo Delgado.
The CEO of TotalEnergies has been trying to get the company listed on the New York Stock Exchange for almost a year. He expressed his confidence at the presentation of his annual results on 5 February, and added that he was working hard on the subject. In the spring of 2024, President Macron expressed his opposition, but Patrick Pouyanné argues that his group's stock market valuation is 30% to 40% lower than that of its American rivals. The CEO of TotalEnergies wants to attract more American investors to replace the French banks that have abandoned him, and for governance to reflect the nationality of the shareholders, half of whom are American. This includes the main shareholder, the Blackrock investment fund.
However, the French want to retain control of the board of directors and Pouyanné is facing resistance from two influential figures at TotalEnergies. Jacques Aschenbroich (Chairperson of Orange) and Jean Lemierre (Chairperson of BNP Paribas) have expressed their concerns about this move, which could tip TotalEnergies towards the United States. The French currently hold seven out of fourteen seats, compared with ten in 2021. The Chairperson of BNP Paribas will step down as a director at the next Annual General Meeting on 23 May. He will be replaced by a Frenchman, Laurent Mignon, in order to maintain parity between French and international directors. In addition to Canadian Lise Croteau, who will be reappointed at the next AGM, the Board could include a second director of American nationality, to replace Dutchwoman Maria van der Hoeven, who will be stepping down in May. Next year, there could be more movement, as the terms of office of three foreigners (a Brazilian, an Australian and a German) come to an end.
Finally, why not "Mozambique First"?
The Mozambique LNG project attracted the largest financing ever for a project in Africa. With Rovuma LNG, Coral Sud FLNG and Coral Nord FLNG, more than US$60 billion has been invested for a potential development of 180 trillion cubic feet. If TotalEnergies were to switch to the US, most of Mozambique's gas production would come under US control. Mozambique and TotalEnergies will need to remain clear-headed about the risks inherent in a transactional approach by the US during Trump's second term in office. This will require considerable expertise in managing relations with the United States. Mozambique, which did not deign to respond to the US proposal to resolve the conflict in Cabo Delgado, should be prepared to take creative advantage of the situation. As head of the Department of Energy, Chris Wright could be an ally in the quest to end energy poverty in a country that is poised to become a major gas producer. (MOZTIMES)
