French energy giant Total SE suspended its $20 billion liquefied natural gas project in Mozambique indefinitely after an escalation of violence in the area, including a March attack by Islamic State-linked militants.
The decision is a blow to Total, which bought a 26.5% stake in the project for $3.9 billion in 2019 hoping to start exporting the super-chilled fuel by the end of 2024. The increasing violence is also a setback for Mozambique, which is now losing out on jobs and revenue from the gas sales.
Hours after Total said on March 24 it was resuming work on the project, stalled since January because of security threats, more than 100 rebels raided the town of Palma. Dozens of people died, millions of dollars of property was damaged and the company immediately froze plans to resume the project.
The fresh violence in the north of the Cabo Delgado province “leads Total, as operator of Mozambique LNG project, to declare force majeure,” the company said in a statement on Monday. That’s “the only way to best protect the project interest, until work can resume.”
Force majeure is a provision that allows parties to suspend or end contracts because of events that are beyond their control, such as wars or natural disasters.
The project had been gaining momentum as Total acquired the operator stake from Anadarko Petroleum Corp. in 2019. The company was making progress on early construction, including an airport along with accommodations for workers. Simultaneously an insurgency was rising in Cabo Delgado province.
The violence has left at least 2,780 people dead, according to the Cabo Ligado website, which tracks the conflict. It’s also displaced more than 700,000 people. While the government has pledged to restore peace, attacks have grown closer to the site, resulting in the evacuation of workers.
Mozambique LNG had completed nearly $16 billion in funding by July last year, involving several banks, despite a slowdown in energy investment as the coronavirus hammered the global economy.