Total’s force majeure declaration has sent the project into a delay, negatively impacting Mozambique’s economic outlook
JOHANNESBURG, South Africa, May 18, 2021/ — As French and African leaders gather on May 18 in Paris for the France-Africa Summit, Mozambican leaders and Total have a brilliant opportunity to push for the resumption of LNG projects in Mozambique and get things going. Even if exploitation of natural resources is not particularly on the Summit’s agenda, there will be no better chance for the gas-rich country to showcase its solutions and arrangements to the issues posed to its gas industry. Notably, as one of the delayed projects involves a consortium led by French supermajor Total, who on April 26 issued a force majeure declaration to its LNG project in the Cabo Delgado province due to the security situation at the moment.
Total’s force majeure declaration has sent the project into a delay, negatively impacting Mozambique’s economic outlook, several international and local companies and workers who are now uncertain when the project and their operations will resume. Make no mistake this has put a lot of companies and even some workers and even communities in Cabo Delgado’s livelihoods at risk.
The African Energy Chamber (“AEC”) recognizes Total’s and the Mozambican government’s effort over the past three weeks to figure out solutions and arrangements to address the security issues in Cabo Delgado. We continue to believe that Total’s LNG project should resume sooner than later, with even more decisiveness and resolve, under the leadership of President Filipe Nyusi with whom the AEC has had recent conversations. The Terror attacks have given President Filipe Nyusi’s presidency a clear focus: to protect the Mozambique people and investors and defeat terrorism while expanding and promoting economic growth. The African Energy Chamber is encouraged that President Nyusi administration’s response, which has been a combination of military action and strong defensive measures to protect everyone in Mozambique.
“We are encouraged by the meeting between President Nyusi and the Total Chairman Patrick Pouyanné. The assurance of a return to Mozambique by Mr Pouyanne is step in the right direction and credit should be given to all parties for the hard work. We continue to believe that Mozambique deserves the respect and support it needs to stabilize the region and get the Mozambique LNG project back up and running again, the cool-off period of the force majeure should be an opportunity to set up better local content structures, fix what is not working, push for an enabling environment and for a stronger comeback for Mozambique’s energy sector”. Stated NJ Ayuk, Executive Chairman of the African Energy Chamber
“We should not forget that Mozambique will be producing Africa’s only Carbon neutral LNG that will be exported and used domestically in a world which is focused on reducing our net carbon footprint from well to wheel. Business gumption and political will is needed at this time but make no mistake Mozambique LNG is going to happen and there are better times ahead.” Concluded Ayuk
Hope and certainty is needed now more than ever for local companies and everyday people to be part of the gas projects, that have suffered unimaginable losses at the hands of the terrorists.
The oil and gas industry has a much more significant role to play in making sure that the projects have lasting stability. We have to rethink how we have been operating as an industry regarding the use of domestic gas. The declaration that there is an availability of domestic gas for Mozambique’s economic development is not sufficient. The energy sector should work with government on the right pricing for domestic gas that creates local petrochemical industries that outperform their competition. This would create a much more lasting effect in Mozambique, as it would create countless jobs and bring life to an otherwise stagnant economy and communities.
To increase the effect in the Mozambican economy, the way we manage local content should also be addressed. We should consider results based local content programs and maybe have some set aside programs that are more inclusive of the population of Cabo Delgado. Such programs should include training and development and entrepreneurial drive to open doors of opportunity to everybody. We in the energy industry must seriously rethink the way these programs are being developed, as they could be an excellent solution for the security issues in Cabo Delgado. More qualified jobs mean fewer disqualified criminals. Mozambicans can no longer be the last hired and the first fired. We should strive to give this opportunity to everybody. We must protect the contracts of local companies during this period of force majeure and also workers. Mozambican workers and service companies do have rent, school fees, loans, and other engagements and we must be sensitive not to continue being that industry of that past that does not care about people. At the end of the day, it is their resources that our industry is extracting.
The multilateral institutions and the energy industry should take advantage of this force majeure suspension period to work with the government to create a rapid and immediate program that will develop indigenous Mozambican companies to develop their technical, financial, and administrative capabilities so they can add actual value to the energy projects. We have witnessed multiple cases where indigenous companies are left behind due to the lack of capabilities, but the fact is, they never stood a chance in the first place. It is imperative for the transfer of technology and training to occur. This period of force majeure should not be a signal to go to sleep. On the contrary, it should be a wake-up call for capacity building of local companies. This way, when the project resumes (which it will), these companies will be capable of providing higher quality services, further accelerating and supporting the growth of the Mozambican economy.