Mozambique is no stranger to political instability. The three-year insurgency in Cabo Delgado province has to date killed more than 2,600 people and displaced an estimated 670,000. These are the sobering statistics released by the UN. The attacks are especially directed at disrupting the investments in oil and gas projects in Mozambique and terrorising the population. The attack on Palma was specifically aimed at undermining the $23bn game changing Mozambique LNG project led by Total.
As the largest Foreign Direct Investment on the African continent, the Mozambique LNG project positions Mozambique to become the third largest gas exporter globally by 2045. It is expected to double Mozambique’s GDP by 2035, underscoring the transformational impact of this project on the country, it’s citizens and neighbouring states. It will fundamentally recast the fortunes of Mozambique from one of the poorest countries in the world to possibly a middle-income country.
Uncertainty Maybe a Long-term Problem
Sasol announced that it would proceed with plans to supply gas to a 450-megawatt (MW) power plant in Mozambique, along with a liquid natural gas plant, with surplus feedstock being exported to South Africa. The project is expected to cost $760 million and commence supplies in 2024. This will enable South Africa to wean itself off coal as a source of power and will contribute to reducing the country’s carbon footprint.
However, with the latest terror attacks, project delays and security concerns will add to costs. Few companies are going to send staff back into areas that have suffered such intense casualties.
The areas have already attracted more than $50 billion worth of investment commitments from consortia led by major international oil companies such as Total, Italy’s Eni, and US-based ExxonMobil. Total and its partners have already invested heavily in an onshore base and liquefied natural gas (LNG) plant on the Afungi Peninsula.
The government has pledged to work with Total to establish a safe zone around the gas complex on the Afungi Peninsula, However, the fact that the attacks on Palma occurred inside the perimeter of the designated zone suggests far more will have to be done to cordon off the area.
Bigger Plans in Jeopardy
The Mozambican gas complex, which is just a few kilometers from Palma, will support upstream development work at the offshore block known as Area 1.
If the project is prevented from being completed, Total will have a hard time proceeding with its $20 billion Mozambique LNG project — and Eni and ExxonMobil will have a hard time following suit with their own South Coral LNG and Rovuma LNG projects.