Total Energy, the world’s leading oil and gas producer, is still seeking to resume the development work of the liquefied natural gas project in Mozambique, amid challenges surrounding costs, after lifting the force majeure status on the project.
The French company said it was facing cost disputes with the contractors on the project. This complicated the situation with regard to determining the date for the resumption of work, according to Reuters.
Total Energy declared force majeure for the project in April 2021, after militants linked to the Islamic State attacked the Cabo Delgado province in northern Mozambique; Where the project is located, as spotted by the specialized energy platform.
The case of force majeure means the occurrence of circumstances beyond the control of one or both of the contractors, which prevent him from fulfilling obligations towards others, and it is a famous case that the oil and gas sector faces in the country with a fragile security situation.
Raise force majeure
The liquefied gas project development in Mozambique continued to be halted for about two years, due to the continuing unstable security conditions in the country, until conditions improved and the company lifted the force majeure status since February 2023.
Total Energy is currently complaining about the greed of the contractors in their estimates of the cost of the project after a two-year hiatus from development; What hinders it from launching the process of resuming the expected work.
And the CEO of the company, Patrick Pouyanné, called on some contractors to be rational in their demands and estimates of increased costs, accusing some of them of trying to take advantage of the previous unacceptable conditions of turmoil.
Contractors are exploited
“We paid what we had to because we stopped the project, and we have to restart it, but we will not accept other costs that we think are not due, and we see no reason to pay more than was paid,” Pouyanné said.
Mozambican President Filipe Nyusi reassured the companies working on the project this week that the Cabo Delgado province was safe enough for them to resume their work without fear.
The Italian Saipem Group, which specializes in oil and gas field services, also announced its readiness to resume work with Total Energy in July 2023.
Total Energy is hesitant
Total and the project partners have not yet reached a specific date for the resumption of work, but it linked this to its review of a report on the humanitarian situation on the ground, according to what was monitored by the specialized energy platform.
This report was scheduled to be completed at the end of February 2023, but it has not yet been completed, and Total has not set a specific date for its completion, according to a recent statement issued by a spokesman for the French company stating that the report is still in preparation.
The state of force majeure and the attack of the militants on the project confused the plans of Total Energy, which aspired to export the first shipment of liquefied gas from it in 2024.
$20 billion
The cost of this project is approximately $20 billion, with plans to produce up to 43 million tons of gas annually through phases that will be implemented in coordination with partners.
Despite Total’s disagreements with the contractors working on the liquefied gas project in Mozambique; It is not concerned that the appeals process will be delayed; For reasons related to the adherence of the future contractors to the purchase and their unwillingness to withdraw.
Total has long-term contracts with Asian and Japanese buyers to buy large quantities of gas from Mozambique’s flagship project, according to the specialized energy platform.
Do contractors quit?
Chief Executive Officer, Patrick Pouyanné, expressed his company’s readiness to deal with any possible withdrawals from the contracting buyers of the project’s gas, which is located in a privileged location on the Indian Ocean that makes it attractive to the market’s appetite, as he put it.
Mozambique, with a population of 33 million, is betting on this pioneering project to improve its economy, whose current total value does not exceed $15 billion.
Mozambique enjoys a privileged geographical location in the southeast of Africa, in addition to its views of the Indian Ocean from the east. This helped it attract foreign investments in the oil and gas sector that exceeded $60 billion until 2023.
Total Energy owns the largest share (26.5%) in the project, while companies from Japan, Thailand and India, in addition to a Mozambican company, acquire the remaining shares in rates ranging from 8.5% to 20%, according to what was monitored by the specialized energy platform.
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