The U.S. EXIM Bank’s approval of a USD 4.7 billion loan for TotalEnergies’ LNG project in Mozambique could bolster the venture’s prospects despite ongoing security risks. The project is seen as crucial for Mozambique’s economic growth, with potential for additional large-scale LNG projects. However, political instability remains a significant concern for development.
The Export-Import Bank of the United States (EXIM) has approved a potential USD 4.7 billion loan for TotalEnergies’ liquefied natural gas (LNG) project in Mozambique. If confirmed, this financing could enhance the project’s prospects, bringing substantial benefits for Mozambique in the medium term, according to Fitch Ratings. However, the ongoing insecurity in the region remains a significant obstacle to the project’s completion.
Mozambique’s Energy Minister, Estevão Pale, indicated that EXIM’s board voted in favor of the loan, although formal confirmation from the bank is still pending. This approval aligns with Fitch’s previous downgrade of Mozambique’s credit rating to “CCC,” suggesting that financial prospects may improve under the new U.S. administration. Some export credit agencies, having committed funds to the project, are reassessing their financial support due to unfolding political events in Mozambique.
Fitch anticipates that work on the TotalEnergies LNG project may resume in 2025 after lifting the force majeure established in 2021. Despite TotalEnergies stating that project operations would not commence until post-2029 due to political unrest, a rapid restart could enable initial production and exports around 2030. The successful development of this project would significantly enhance Mozambique’s economic growth and fiscal revenues.
Additionally, the resumption of TotalEnergies’ LNG project may pave the way for ExxonMobil’s proposed USD 30 billion LNG venture, which is expected to be the largest in Mozambique with a capacity of 18 million tonnes per annum (mtpa). Production from this new project is anticipated to begin after 2030.
Eni is also advancing its LNG development by ordering a second floating facility, Coral North, alongside the existing Coral South project, set for completion by 2027-2028. Both facilities are designed for offshore production with a capacity of 3.7 mtpa but are independent of TotalEnergies’ project timeline.
Despite these developments, security challenges and ongoing political instability could significantly impact the progress of the TotalEnergies LNG project. The involvement of a Rwandan force for support since 2021 remains uncertain, particularly considering the EU’s funding and potential restrictions on Rwandan military personnel facing allegations of conflict involvement. Continued domestic unrest could further hinder project advancements.
The growth of Mozambique’s LNG sector is critical to improving the country’s credit outlook. However, key determinants of its sovereign rating will include access to external financing, public finance consolidation, and the stabilization of domestic political and social conditions that facilitate economic normalization.
In conclusion, the approval of a USD 4.7 billion loan for TotalEnergies’ LNG project by the U.S. Export-Import Bank could significantly enhance Mozambique’s economic prospects. Yet, the persistence of security threats and political instability poses substantial risks to the project’s progression. Setting aside these challenges, the successful advancement of the LNG sector could be pivotal for Mozambique’s overall economic health and credit profile moving forward.
Original Source: clubofmozambique.com
