LNG projects in Mozambique threatened by upsurge in attacks
The drastic escalation of terrorist activities in northeast Mozambique over the past week and the long-standing insurgency of Islamist terrorists not only jeopardize the success of the country’s major LNG projects, but also the future. economy of the country. The development of the LNG fields in Mozambique is absolutely crucial for the economic success of Mozambique, one of the poorest countries in the world.
With the onset of the end of the rainy season, Islamist fighters known as Ahlu-Sunnah Wa-Jama ((ASWJ) – with ties to the so-called “ Islamic State ” – launched the last week their latest offensive in the province of Cabo Delgado in the northeastern part of the country and more specifically around and inside the coastal city of Palma and nearly the total of $ 20 billion Mozambique LNG Development Project led by the French oil major Total.
The insurgents – who have been active in various parts of the region since 2017 – launched a new planned offensive and a series of killings from March 24 targeting locals and foreigners. According to first-hand reports, they were well organized and well armed with automatic weapons, RPGs, and mortars. And it is no coincidence that the LNG development zone is at the center of this latest attack. Reports from Palma indicate that the Mozambican armed forces – Forcas Armadas de Mocambique (FADM) – were nowhere to be found before March 28. The private security firms (for example Dyck Advisory Group) were above all the only real opposition, and equipped with helicopters, the only real means of escape for some foreigners.
This basic description may be an oversimplification of these more recent events, but full details have been slow to come out of this huge and relatively remote part of the country. What is clear is that the brutality – the murder of women and children, multiple beheadings, etc. – and the intensity of the attack are designed to sow real disturbance and fear. Since 2017, more than 700,000 people have been displaced by such terrorist attacks in the region.
What is also quite clear is that the government has failed for years to properly deal with the situation. It failed to protect the local population, it failed to spread the hope of economic advancement with the spread of jobs and poverty reduction with basic principles such as clean water, electricity, sanitation, health and education, and it fails to function properly. protect foreign direct investment (FID) for LNG which can lift the country out of extreme poverty.
So why has this situation languished for so long now without any real sign that the government or the FADM is making any real meaningful progress? Speaking to Robert Besseling, CEO of Pangea-Risk, the specialist intelligence company, he explained: “First, the Mozambican government does not cooperate with other governments in the region, regional security structures or other institutions because he is unwilling to reveal gravity. conflict, and its own shortcomings in handling the insurgency. ”
He adds: “There have been countless human rights violations perpetrated by local security forces, the collaboration of state actors with insurgents and the political motivations of activism. It also explains why private military contractors with often questionable mandates are employed to engage in combat operations.
“Second, and most importantly, there is a widespread misunderstanding or lack of understanding around the concept of insurgency. Activism is rooted in deeply rooted socio-economic, ethnic and political grievances, which remain unanswered. In fact, by contracting private military companies and encouraging often brutal counterinsurgency tactics by local troops, these grievances have been exacerbated, thereby spurring local recruitment and escalating militancy tactics.
Besseling is adamant that the government must not only engage properly with regional and foreign aid, but also actively provide it. He adds: “In order to find an immediate way out of this crisis and avoid a further escalation that threatens the development of the LNG sector, the Mozambican government must seek the support of the regional security structures of the LNG Development Community. Southern Africa (SADC), neighboring South Africa and major investment partners in LNG projects, such as France, Italy and the United States.
“However, to end an insurgency, Mozambique and the region must address the underlying grievances that sparked the insurgency in the first place, that is. poverty, political exclusion, religious intolerance, ethnic fragmentation and wealth inequality, among others. “
The report on the Pangea-Risk insurgency in Mozambique released on March 12 also provides real insight into the Mozambican government’s procrastination. He said: “An intergovernmental SADC summit which was to take place in January to discuss a regional response to the crisis would have been postponed until May or June to allow SADC commanders to meet for the first time.
“South Africa’s Department of International Relations and Cooperation officials have expressed frustration that their Mozambican counterparts have yet to provide guidance on what kind of support Mozambique needs.
“In the meantime, support from non-regional states seems more likely to emerge. Portuguese Defense Minister Joao Cravinho said a Portuguese special forces detachment could start conducting training activities with the FADM in Mozambique as early as April. Portugal will also provide logistical and material support in accordance with the training program. “
So much at stake
Globally, the biggest energy project funding in the last year was the global $ 20 billion LNG project in Mozambique. Debt financing of $ 14.9 billion was closed in the third quarter, making it the largest ever export credit agency-backed project in sub-Saharan Africa. The project has four direct ECA lenders: JBIC ($ 3 billion), US Exim ($ 4.7 billion), Thai Eximbank ($ 150 million), UKEF ($ 300 million), four other OCEs with covered tranches, as well as loans from Afreximbank, African Development Bank, DBSA and some 19 commercial bank lenders.
There is a seven person sponsor group covering five different countries including Total (26.5%), ENH (15%), Mitsui (20%), ONGC (10%), Beas Rovuma Energy Mozambique (10%), BPRL Ventures Mozambique (10%) and PTTEP Mozambique Zone 1 (8.5%). The project is the first onshore LNG project in Mozambique and includes offshore extraction infrastructure, subsea pipelines, an onshore processing plant and other support facilities. Mozambique LNG plans to produce the first LNG in 2024, providing 12.88 MTPA of LNG in its first phase.
Once fully operational, the LNG project will play an important role in Mozambique’s economic development and global energy transition by being a catalyst for changes in the global energy mix with declining sources of coal and heavy oil. With targeted exporting countries largely based in Asia (India and China in particular), part of the volumes sold by the Mozambique LNG project will be used in power generation to replace coal and heavy oil, which will reduce emissions of carbon globally. This FDI and others are expected to transform Mozambique.
ExxonMobil is also set to start the Rovuma LNG project, initially estimated at an overall investment of $ 30 billion. Exxon’s (FID) final investment decision was initially delayed due to low gas prices, but for some time it has been the deteriorating security situation that has really pushed its FID back. The Rovuma gas field is in the same area as that of Mozambique LNG, and at the end of 2020 it was reported that Total and Exxon were in talks, with the Mozambican government, on some aspects of a shared approach to extraction. .
The field that straddles the two projects is said to contain thicker gas and therefore less expensive to extract and convert to LNG than reserves elsewhere in both projects. Any new agreement in this direction could result in reduced costs for the two main sponsors of these projects, greater efficiency and increased production. But – and this is a big but – it all depends on deploying adequate security to protect the operations and the huge investments at stake.
Looking at the massive amounts provided through direct ECA funding and DFI funding for Mozambique’s LNG, it is surprising that these institutions and some of the governments involved do not make more noise. For example, US Exim has pledged $ 4.7 billion in direct loans – its highest amount ever for a project in sub-Saharan Africa. This is obviously an extremely important project for American companies and suppliers, and at the same time, it allows US Exim to counter the influence of China in the region. The United States is also Mozambique’s largest bilateral donor.
The US government seems to be waking up a little more to the extreme threat from the ASWJ. In mid-February, US Ambassador to Mozambique Dennis Hearne said the US was ready to provide unspecified security assistance in accordance with any request from the Mozambican government. And in early March, the United States officially designated ASWJ as a global terrorist entity. But as seen over the past two years, the Mozambican government has been so reluctant to seek outside help to deal with this problem. A paralysis which greatly aggravated the situation.
It also encourages Total to consider project logistics scenarios different from those initially planned. For example, it has been reported that Total is planning to create a logistics base on the French island of Mayotte in the Indian Ocean rather than in Mozambique. This will likely put an end to the Mozambican government’s hopes of establishing such a base in Cabo Delgado and much needed potential jobs for the local population. Total is also planning to build an LNG import terminal in Maputo in the south of the country where the domestic gas allocation for the project will be transported by boat.
The increased focus of attacks on LNG development areas is now really raising the bar for all parties involved and, indeed, for the country’s economic future. As the Pangea-Risk insurgency report in Mozambique points out: “ASWJ has demonstrated a keen awareness of the importance of LNG development in the region, and targeting the sector complements the group’s strategic and tactical goals. For example, attacks near LNG facilities both affect government revenues by disrupting business activity and also distract security forces from devoting significant resources to protecting LNG assets, which could undermine government offensives in other districts and create new security gaps.
The Mozambican government is long overdue to properly address these fundamental issues. It must, as a matter of urgency, formally request specific regional and non-regional aid and, moreover, it owes it both to the population in difficulty and to the companies and institutions which have invested so much in the development of LNG.