By MOZTIMES
Maputo (MOZTIMES) – According to a report in Monday’s issue of the London “Financial Times”, the British government intends to withdraw financing for the Mozambique LNG project, headed by the French oil and gas company TotalEnergies.
The government had promised a loan equivalent to 1.15 billion US dollars for the project, which had been at a standstill since a terrorist attack in March 2021 forced TotalEnergies to declare a state of force majeure.
Total lifted the force majeure in October, but the British loan is now in serious doubt. The “Financial Times” says that the British Business Secretary, Peter Kyle, is due to make a statement on the project on Monday, with people familiar with the matter saying he will withdraw export finance for the project.
TotalEnergies has signalled that any withdrawal of British funding is unlikely to stop the 20 billion US dollar project, which has secured backing from other governments including the US and Japan. But the decision is a blow to Total and other companies involved in the project, including Japan’s Mitsui.
The loan by the UK Export Finance (UKEF), a government agency, was agreed in 2020 but has been opposed by environmental and human rights groups. The former Conservative government led by the now discredited Boris Johnson brought in measures to end the financing of fossil fuel projects overseas shortly after the UK had agreed to back the project.
However, the UK’s current government, under the Labour Party, has been seeking ways to extricate itself. Earlier this year, the Financial Times reported that the government took legal advice on whether it could exit the financing deal.
Export financing is designed to support international projects in the UK’s interest. The British energy and service company Centrica is among the companies set to buy gas from the Mozambique LNG project and British subcontractors are also involved.
Patrick Pouyanné, TotalEnergies chief executive, said in February that he was “ready to exercise all my contractual rights” if export credit agencies did not stand by their contracts. As well as the UK, the Dutch government is reviewing its support for the project.
Pouyanne told analysts that financing was “back on track” after the US approved a move to unlock almost five billion dollars in funding in March.
In October, TotalEnergies asked the Mozambican government to approve an additional 4.5 billion dollars in costs supposedly incurred because of the period of force majeure, and to extend the project’s timeline by another decade years.
The government has rejected the ten year extension but has not yet replied to the request for 4.5 billion dollars in extra costs. (MT)
