TotalEnergies’ delayed Mozambique LNG project outlook is increasingly uncertain.
According to the Institute for Energy Economics and Financial Analysis (IEEFA) the company had failed to convince the outgoing US Biden administration to release $4.7 bill in funding for the project, quoting an article in the UK’s Financial Times at the end of last month.
The $20 bill project – due to become the largest direct foreign investment in Africa – secured funding in 2020. However, the following year TotalEnergies declared force majeure after violence in the north of Mozambique by Islamist insurgents close to the project site. Funding from the US Export-Import Bank, as well as from the UK and Netherlands’ governments, now must be re-approved.
As the FT reported, disclosed letters to the Biden administration from the company’s CEO, Patrick Pouyanné, highlighted concerns that the transition to the Trump administration would add further delays that could “undermine the financing structure, already in place and approved, and bring the entire project to a stop”.
There are now key questions over whether the US, UK and Netherlands will want to approve the project, and indeed whether they should, IEEFA said.
It remains to be seen whether the Trump administration will be in favour of funding Mozambique LNG given its ‘America first’ stance and the lack of any US participation in the project.
In January, President Donald Trump signed the Unleashing American Energy executive order, which ended the pause on further LNG export permits. Does this fit with US funding for a French, Japanese, Indian and Thai project, particularly in the context of questionable long-term LNG demand?
The participating governments should also consider the risks and controversies plaguing the project, IEEFA said.
Pouyanné told investors in October, 2024 that the project would be restarted by the end of that year. But it was delayed again after violence broke out in Mozambique following disputed elections, which European Union observers concluded were “marked by anomalies and serious flaws”.
There is fresh controversy over the presence of Rwandan troops in northern Mozambique. They were sent there in 2021 to quell the Islamist insurgency and pave the way for the restart of the LNG project.
The EU has been funding Rwanda’s deployment, and TotalEnergies has hired a security company backed by the Rwandan ruling party to guard the project.
France has demanded that Rwandan forces leave the Democratic Republic of Congo (DRC), following an escalation of violence in the country. Will an EU member, such as the Netherlands, still want to fund an LNG project protected by Rwandan forces amid calls to reduce Western support for the regime?
Apart from the controversies, there is another good reason potential financiers shouldn’t back the project.
As IEEFA has been warning, lacklustre demand growth and a huge wave of new export capacity are poised to send global LNG markets into oversupply, pushing down prices.
The US and Qatar account for much of the new supply due to come online but increases could also come from the Republic of Congo, Nigeria, Gabon and later Tanzania, in addition to Mozambique.
Demand growth does not look like it will be sufficient to match this new supply. European imports may rise in 2025 but IEEFA expected LNG demand in Europe, Japan and South Korea tol fall through 2030. Together these countries account for more than half of global LNG imports.
Meanwhile, the idea that LNG will be a bridge fuel that will allow China to reduce its coal consumption is not playing out. China’s astonishing rate of wind and solar installation and reliance on gas imports via pipeline mean the country’s demand will likely disappoint LNG exporters.
The International Institute for Sustainable Development has warned that the financial benefits of LNG development in Mozambique will be weighted towards multinational oil and gas companies, with little left for the country itself.
