TotalEnergies CEO: Mozambique LNG contractors need to be “reasonable” regarding costs

Patrick Pouyanne, CEO of TotalEnergies, said on Thursday that some of the contractors of its giant $20 billion Mozambique LNG project need to be “reasonable” regarding the cost terms of their contracts, as the company and its partners work to restart the project.

The French energy giant declared force majeure on the LNG project in April 2021 and withdrew all personnel from the site due to new attacks.

In February, Pouyanne said the company was “not in a hurry” to restart the project, pointing out that security, human rights, and maintaining costs are the main three elements to make the decision to return to the Afungi site in Cabo Delgado province.

The CEO also entrusted Jean-Christophe Rufin, an expert in humanitarian action and human rights, with an independent mission to assess the humanitarian situation in the province.

The project’s EPC contractor is CCS JV, a venture between Saipem, McDermott, and Chiyoda.

Saipem said in February that it is expecting to restart work on the Mozambique LNG project in July this year, while Mozambique President Filipe Nyusi reportedly said this week that it is safe for TotalEnergies to continue work on the project.

Pouyanne told analysts on Thursday during the company’s first-quarter results call that the cost terms are the last step before restarting the project.

“I commented recently that we need the contractors to be reasonable. Some of them are not. So we will repeat some of the packages because there is no way for us to accept some undue costs,” he said.

“We have paid what we had to pay because we stopped the project and we have to restart the project that had an impact, obviously. We don’t see why we should pay more than that,” Pouyanne said.

He told the analysts that it is “premature” to provide more information as the project team is working with the contractors “with a view to be able to announce the project, but under the conditions that the costs are controlled. That’s fundamental to us,” Pouyanne said.

Buyers remain committed to Mozambique LNG

Mozambique LNG includes the development of offshore gas fields in Mozambique’s Area 1 and a 12.8 mtpa liquefaction plant at the Afungi complex.

Besides TotalEnergies, other partners in the project are Japan’s Mitsui, Mozambique’s ENH, Thailand’s PTT, and Indian firms ONGC, Bharat Petroleum, and Oil India.

TotalEnergies previously said that almost 90 production of the Mozambique LNG project is sold through long-term contracts with key LNG buyers in Asia and in Europe.

The firm previously planned to start shipping cargoes in 2024.

Despite the delay, all of the LNG buyers remain committed to their offtake contracts, according to Pouyanne.

“The buyers did not exercise any contract clause with the project,” he said.

He said that TotalEnergies also booked about 0.7 million tonnes per year from the project.

“If some buyers prefer to withdraw, we are ready to take more, so we are open to that, but some Japanese buyers are also ready to take more,” he said, adding that Mitsui is among them.

He said there is “some appetite in the market” as Mozambique LNG has huge reserves and the project is “well located” directly on the Indian Ocean.

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