EXIM’s approval of a USD 4.7 billion loan for TotalEnergies’ LNG project in Mozambique could enhance economic prospects for the country. Despite this opportunity, ongoing security and political issues pose risks. Successful project development remains essential for Mozambique’s economic growth and credit rating, highlighting the need for resolution of domestic tensions and external financing access.
The Export-Import Bank of the United States (EXIM) has reportedly approved a USD 4.7 billion loan for TotalEnergies’ liquefied natural gas (LNG) project in Mozambique. Fitch Ratings suggests that this approval could significantly enhance the potential for resuming the large-scale project, thus offering multiple economic benefits for Mozambique. Nonetheless, ongoing security issues pose considerable risks to the completion of this development.
Estevão Pale, Mozambique’s Energy Minister, indicated that EXIM’s board has voted in favor of the funding. However, confirmation from EXIM is still pending. If the reports are verified, it supports Fitch’s prior assertion regarding improving financing prospects for Mozambique under the current U.S. administration. Other export credit agencies initially involved in the project have been reassessing their financial commitments amid evolving political circumstances in the country.
Fitch assumes that work on TotalEnergies’ LNG initiative will resume in 2025, following the expected lifting of the force majeure imposed since 2021. Although TotalEnergies previously indicated that operational status would not be reached until after 2029 due to unrest, a rapid restart may enable production and exports to commence around 2030.
The successful advancement of this LNG project holds the potential to stimulate economic growth and bolster Mozambique’s export revenues and fiscal health. Notably, initial repayments of approximately USD 250 million annually on Mozambique’s USD 900 million Eurobond are scheduled to commence in 2028, overlapping with the anticipated start of production.
Furthermore, the revival of construction on the TotalEnergies project could expedite decision-making on ExxonMobil’s proposed USD 30 billion LNG venture, which is expected to be partly onshore. This project may yield a production capacity greater than that of TotalEnergies, reaching 18 million tonnes per annum, with operations projected to start post-2030.
Eni is also progressing with a second floating facility (Coral North) for Area 4, expected to match the Coral South capacity of 3.7 mtpa. The operation is anticipated to begin between 2027 and 2028, although its development is independent of that of TotalEnergies.
Security concerns and ongoing political instability remain factors that could hinder the TotalEnergies LNG project’s resumption. The uncertainty surrounding the continued effectiveness of a Rwandan security force, in place since 2021, significantly contributes to these risks. Additionally, fluctuations in EU funding due to internal controversies within the Rwandan military could impact regional security dynamics critical to the project.
Progress within the LNG sector is crucial for Mozambique’s medium-term credit rating. However, more significant determinants include the government’s access to external financing, fiscal consolidation efforts, and the resolution of domestic political and social tensions that are necessary to revitalize economic activities.
In conclusion, the potential affirmation of the USD 4.7 billion loan from EXIM for TotalEnergies’ LNG project could significantly enhance Mozambique’s economic prospects. Despite ongoing security and political challenges, the successful resumption and development of the LNG sector are vital for improving Mozambique’s fiscal health and credit profile. Close attention to international financing and local stability will be crucial for navigating future uncertainties and realizing the benefits of these projects.
Original Source: clubofmozambique.com
