‘Growing risks for $50bn Mozambique LNG projects’ 31 January 2021

French oil and gas company Total is facing increased security concerns at its $20bn Mozambique liquefied natural gas (LNG) project. The company has been removing staff from the project site as a three-year old Islamist militant insurgency in the northern province of Cabo Delgado escalates. Total’s Mozambique LNG plant is one of two projects on the Afungi Peninsula. The other is ExxonMobil’s Rovuma LNG project. Both are intended to involve $50bn of investment — the largest industrial investment in Africa. The Mozambique LNG project is intended to begin production in 2024. However, a January 2021 Mozambique oil and gas risk commentary by IHS Markit noted that the increasing security concerns, along with Covid-19, have “raised major questions over the timelines for such huge undertakings in one of Mozambique’s least developed areas”… Further delays to the LNG projects would mean they come online even deeper into the ongoing energy transition, meaning they may face further regulatory hurdles.

…The growing environmental, social and governance (ESG) concerns of investors also mean there are significant reputational risks for companies investing in LNG in Mozambique. Circumstances in Cabo Delgado province, and across the country, are giving rise to social and governance concerns, in addition to the environmental impact of GHG emissions. Eni, in particular, ought to be aware of reputational risks arising from activities in Africa. The company, along with Shell, stands accused by Italian prosecutors of being fully aware of bribes paid to secure an oilfield off the coast of Nigeria. Issues in Mozambique that could raise responsible investor’s eyebrows are plentiful…After a local newspaper reported on leaked contracts between LNG developers and the Mozambique government concerning the provision of troops for security, the offices of the newspaper were torched in a suspected arson attack. There is no suggestion that any of the LNG developers were involved in this incident.

…Total has, indeed, signed a security pact with the Mozambique government that will see state troops protect the project site. That the Mozambique government is more focused on defending LNG projects while a humanitarian crisis in northern Mozambique is getting worse may not go unnoticed for long by investors with ESG concerns…Total has stated that “each Mozambican military or police officer assigned to the protection of the facility receives Voluntary Principles on Security and Human Rights training.”