The consultancy firm Business Monitor International (BMI) believes that the outlook for natural gas projects in Mozambique is improving, despite the delay in the resumption of work by the French oil and gas company, TotalEnergies, in the northern province of Cabo Delgado.
“The outlook for mega-projects in Mozambique is improving, with progress being made on the resumption of projects. TotalEnergies has taken several steps to restart the project, following the violence in 2021, which forced the company to declare ‘force majeure’ and suspend construction activities of the plant that will liquefy the gas, allowing it to be exported”, reads the BMI report regarding the country’s natural gas sector.
According to data unveiled by this consultancy firm, which is owned by the same people as the financial rating agency Fitch Ratings, TotalEnergies should restart work in the first half of next year, after renegotiating contracts with local contractors.
“The final consideration for re-launching the project is to renegotiate costs with local contractors. Since the project was suspended, there have been several large price rises in raw materials, energy and labour, as well as a general increase in inflation, which will decrease the profit margins of the project”, reads the document.
Recently, the CEO of TotalEnergies, Patrick Pouyanne, said that “none of the old gas buyers have exercised their right to leave the project and there is still strong demand even if they do leave.”
“For 2023, we anticipate that gas production in Mozambique will rise 47 per cent to 9.27 bcm [billion cubic metres], up from 6.31 bcm in 2022”, the analysts estimate, stressing that the outlook is for gas production to reach 44.1 bcm in 2032, which has the potential to transform the Mozambican economy not only due to local development but also due to the strong flow of state revenue from these projects.
Mozambique has three development projects approved to exploit the natural gas reserves in the Rovuma basin, classified as among the largest in the world, off the coast of Cabo Delgado.
Two of these projects are large-scale and involve channelling the gas from the seabed to land, before cooling it in a factory to export it by sea in a liquid state.
One is led by TotalEnergies (the Rovuma Basin Area 1 consortium) and work progressed until it was suspended indefinitely after an attack by Islamist terrorists against the town of Palma in March 2021. That attack led the French energy company to invoke the “force majeure” clause in its contract and declare that it would only resume work when the area was safe.
The second large-scale project is led by ExxonMobil and the Italian energy company ENI (Rovuma Basin Area 4 consortium), but the final investment decision has not yet been taken.
A third completed and much smaller project, the Coral FLNG project, also belongs to the Area 4 consortium and consists of a floating platform for capturing and processing gas for export, directly at sea.
Exports from the floating platform began in November 2022, and it remains the only liquefied natural gas venture in Cabo Delgado that is in production.