When TotalEnergies declared force majeure on its Liquid Natural Gas (LNG) project in Mozambique’s northern Cabo Delgado province in April last year, in the face of a violent local insurgency, it was a heavy blow to the development of an industry which has the potential to transform the country. But in 2022 the industry is moving ahead once again and Mozambique’s prospects for developing into the world’s 5th largest exporter of LNG (behind the Australia, United States, Qatar and Malaysia) by the end of the decade may well be back on track.

A very large offshore natural gas field was discovered in the Rovuma basin off northern Mozambique in 2011. The discovery, now estimated at 100 tcf (trillion cubic feet) had the potential to turn the country into one of the world’s gas powers. For some sense of scale, this discovery can be compared to Australia’s reserves – only 70 tcf – even through that country was the world’s biggest LNG exporter in 2021.

Three major LNG projects were originally mooted in Mozambique. A wholly-offshore floating platform, planned by a consortium led by Italy’s ENI (Ente Nazionale Idrocarburi (“State Hydrocarbons Authority”), was first off the mark and made its final investment decision in late 2016. Two other consortia – one led by TotalEnergies (which bought out early project developer Andarko in 2019) and the other by ExxonMobil – planned to build much larger on-shore LNG trains in the far north of Mozambique.

LNG trains are the answer to the problem of how to commercialise gas resources located in remote places, often referred to as ‘stranded resources’. Pipelines are only viable up to a distance of about 2 500 kilometres from source although they do supply about 87 percent of the global gas market at the moment. LNG trains chill gas to a temperature of -162° Celsius, a process which turns it into a liquid (which occupies 1/600th of its original volume) and enables seaborn transport in heavily insulated tankers.

The only viable pipeline market on any scale within reach of Mozambique’s Rovuma basin is South Africa. But South Africa has been extremely slow to incorporate gas into its energy plans. The country’s Gas Utilization Master Plan (GUMP) was originally demanded by the Parliamentary Standing Committee on energy as long ago as 2014 but has only partially seen the light of day (in the form of a ‘Base Case’) in December 2021. Advocates of gas as part of the solution to South Africa’s energy security problems were also disappointed to see that only 3 000 megawatts (MW) of generation capacity was allocated to gas (out of a planned total of 35 000 MW) in the 2019 Integrated Resource Plan (IRP2019).

South Africa has lagged even the minimal gas allocation in IRP2019. The only substantial gas user in the country is petrochemicals giant Sasol which imports gas as an industrial feedstock from the older and much smaller onshore Pande-Temane gas field near Vilanculos in mid-Mozambique. Sasol demonstrated what is possible for South Africa with the private construction of a 140MW gas-fired power station at Sasolburg in the northern Free State. The plant, which opened in 2013, cost ZAR1.9 billion, took 15 months to complete and could meet the power needs of a small South African city like Bloemfontein.

South Africa would in any case only be a marginal customer for the Rovuma gas field. The big market for LNG is Asia where demand appears to be almost insatiable. China overtook Japan as the world’s biggest LNG importer in 2021 and both countries are looking to the super-chilled fuel as part of their carbon reduction strategies.

The smallest of the three LNG projects mooted for Mozambique – a wholly offshore Floating LNG (FLNG) vessel operated by Italy’s Eni (the company which discovered the original gas field) – took a significant step forward when the ship, the 200 000 tonne Coral-Sul FLNG, arrived in Mozambique in January. The vessel, constructed by Samsung Heavy Industries of South Korea is only the third such vessel ever built.

The Coral-Sul is expected to begin production in the second half of the year, operating 100 kilometres offshore. It has a capacity of 3.4 million tonnes of LNG per year, a little over 10 percent of the (30 million tonnes) potential of the three mooted projects. To get some sense of the scale of the potential, it might be noted that the world’s leading LNG producer, Qatar, currently produces 77 million tonnes per annum.

Also in January, TotalEnergies CEO Patrick Pouyanne, on a visit to Maputo, stated that the company hoped to resume work on the project it leads during the course of this year. This depends on the restoration of security and ‘return to normal’ of towns near the project in Cabo Delgado.

TotalEnergies halted development after Islamic insurgents occupied and looted the town of Palma in March 2021, killing over 50 people, including sub-contractors on the project. It took some months to restore security in the area with stability only being achieved after the deployment of Rwandan troops, probably at the behest of the French government, in August, followed by Southern African Development Community soldiers.

The TotalEnergies consortium made its final investment decision in 2019. Its two train LNG project is expected to produce 12.9 million tonnes per year and has been designed with the possibility of adding a further two trains later. The US$25 billion finance arrangement (of which the US$14.9 billion debt component is said to the largest ever such loan in Africa) was reported to still be in place at the end of last year. At the same time, export credit arrangements – with agencies in the US, South Korea, Japan, Thailand, the UK, Italy and South Africa – were also intact, indicating that the underwriters still expected the project to go ahead. The company has said the delay has set back the project two years, with first production now possible only in 2026.

The other major project is much less certain. The final investment decision by the ExxonMobil-led consortium has been repeatedly delayed, possibly by low LNG prices when first expected in 2020 and then by economic headwinds following the outbreak of Covid-19 and finally by the 2021 security concerns. It may however be inspired by the demonstration effect if the TotalEnergies project goes ahead this year.

Although the LNG projects come with all the limitations of enclave-type development, there is little doubt that, appropriately managed, they will have a transformative effect on Mozambique. The World Bank has argued that when the LNG projects are implemented, Mozambique’s economic growth rate would ‘reach double figures’. A great deal thus hinges on TotalEnergies being able to get back to work in Cabo Delgado as soon as possible.