French energy group Total (TOTF.PA) declared force majeure on its $20 billion liquefied natural gas (LNG) project in Mozambique and confirmed it had withdrawn all staff from the construction site following insurgent attacks last month.
Dozens of civilians were killed in the Islamic State-linked attacks in the coastal Mozambique town of Palma, near gas projects that are worth $60 billion and are aimed at transforming the East African nation's economy. read more
The violence in March has dealt a blow to plans by Total and rival Exxon Mobil (XOM.N), which also has an LNG project in Mozambique, to turn the country into a major LNG producer to rival Australia, Qatar, Russia and the United States.
It also comes as major energy companies reassess their approach to LNG, once seen as a fuel of the future because it has lower emissions than coal or oil but now under scrutiny in the drive to cut carbon emissions even more deeply.
"Considering the evolution of the security situation ... Total confirms the withdrawal of all Mozambique LNG project personnel from the Afungi site. This situation leads Total, as operator of Mozambique LNG project, to declare force majeure," the company said on Monday.
Total, which aimed to produce its first cargo from the project in 2024, suspended work on March 27 after the militant attack.
Declaring force majeure implies a weightier suspension and allows Total to cancel contractors.
"Mozambique was considered the next LNG El Dorado thanks to its large, low-cost resource base and ideal location to supply key demand centres," said Thomas Adolff from Credit Suisse.
"But instead it is looking more like ... Mozambique no longer playing a big role in the 2020s," he added.
Carlos Zacarias, chairman of the institute that governs Mozambique's energy development, told a news conference that Total would not fulfil contractual obligations while the force majeure was in place.
He added that Total had not abandoned the project.
Mozambique President Filipe Nyusi said this month that the government would work to restore peace. read more
The LNG project includes development of the Golfinho and Atum natural gas fields in the Offshore Area 1 concession and the construction of a two-train liquefaction plant with capacity of 13.12 million tonnes per annum (mtpa).
Total secured a $14.9 billion debt financing package in July to fund its rollout. On Monday the company said it had agreement from the lenders to pause the debt drawdown.
It also said it was too early to provide an updated project schedule, though there was speculation among some contractors that the delay could last at least a year.
